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Healthcare Providers in Retail Settings Is A Win-Win-Win

Baylor-Family-Medicine-Houston

JLL recently represented Baylor Family Medicine in its lease of an 8,000-square-foot Class A retail space in the River Oaks neighborhood of Houston. The clinic offers both primary care and urgent care services.

With a solid healthcare provider as a tenant, everyone wins: Landlords realize draws in traffic to the property, while providers expand their services and reach more patients and consumers enjoy added convenience and generally lower medical costs.

The practice of housing healthcare providers in retail locations has become commonplace across the United States. Changing dynamics in healthcare reform, technological advances, demographic shifts and consumer preferences drove this shift. JLL’s recent research report on retail and the new healthcare consumer provides some interesting insights into this growing trend.

Chris Wadley, JLL

Provider, Patient Benefits

Retail-based healthcare has emerged as an effective means of delivering quality, convenient treatment to millions of consumers, and is becoming a model for healthcare systems to consider when providing services to new and existing patient populations. For healthcare providers, retail locations offer better proximity to patients’ residences and facilities designed to accommodate a higher volume of patients per day.

Providers have learned that a visit to the hospital or a medical office can create stress for patients before they even enter the building, so many retail healthcare facilities are designed with a “customer experience” mindset, improving the patient experience with familiarity and convenience.

Walgreens-Houston

Walgreens has partnered with Chicago-based healthcare provider VillageMD to open primary care clinics next to five of the retailer’s Houston stores. The move comes as part of a larger effort by Walgreens to enter the primary care market.

Healthcare consumers have been clear in conveying what they are looking for. Patients want easy access to medical services, including extended hours, locations near local shopping, walk-in appointments and low prices. According to the National Institute of Health, since the first retail health clinic opened in 2000, 44 percent of patient visits have taken place outside of traditional physician office hours.

Healthcare providers have embraced this trend. These operators are responding by offering patients these important convenience factors via targeting retail locations that are locally relevant, functionally accessible, visible and tailored to the nearby population’s specific needs.

The best retail health environments offer a variety of specialties that patients need. Real estate costs are lower within retail properties; therefore extending services at these locations is not only an improved experience, but also typically a lower-cost option for the patient.

Benefits for Landlords

Retail center owners with healthcare services and medical providers as tenants are realizing benefits such as increased foot traffic and sales growth, as well as improved cross-selling, brand recognition and enhanced customer experiences.

Healthcare services fit many of today’s retail center goals by bringing to the property patients and employees who frequent neighboring businesses each day. A healthcare tenant can also boost stability and spending at a retail center by drawing in pedestrian business and adding to the “wellness” experience for consumers.

The potential of medical uses is even more apparent when you consider the recent growth in retail clinics. At the end of 2017, there were an estimated 2,800 medical clinics in retail space in the United States, according to Accenture. This number grew from 351 in 2006, and between 2015 and 2017 it increased by 47 percent. Following this same trend, it is reasonable to predict that the number of healthcare tenants in retail locations could nearly double by 2022.

From a landlord’s perspective, adding a healthcare provider as a tenant can have many additional benefits. Physician and hospital groups often have higher credit ratings than traditional retailers, and many also have a greater level of commitment to the community that mitigates risk to the property’s financial performance. Often, medical tenants demand longer lease terms, which increases property valuations.

Everybody Wins

The scope of healthcare services offered in retail locations is quickly growing beyond flu shots, sore throats and routine health exams. Now, patients can receive preventive screenings, chronic disease management, infusion services and pre-operation examinations.

These complex services, traditionally provided at hospitals or dedicated medical centers, are a growing opportunity in the retail real estate sector as the over-65 population — an age group that spends five times more on annual medical expenses than the average consumer — is projected to more than double from 2015 to 2060.

Healthcare systems are also learning the importance of logistics infrastructure from the rise of e-commerce. Major retailers represent potential partners for big health systems trying to capture large populations quickly with minimal investments.

Retail chains can offer thousands of distribution points across the country, while providing health systems with low overhead costs and an influx of new patients who in turn benefit from the convenience and often lower fees associated with the arrangement.

As an increasing number of retailers establish relationships with local physicians and hospitals to help patients obtain the appropriate level of care, added benefits to surrounding businesses will occur as well.

By Chris Wadley, healthcare, life sciences and higher education lead, JLL. This article first appeared in the May 2019 issue of Texas Real Estate Business magazine.

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