How Big Will The Health Care In Malls Concept Get?

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The way America shops has changed, but some experiences are still better in person. The same can be said of health care.

Not long ago, outpatient health care and megamalls would have seemed like an odd marriage. But today’s consumers understand this is a marriage of convenience — one that can offer great benefits.

“The demand for health services detached from a large hospital is growing rapidly,” said Patrick Christensen, president of Sturtevant-based Horizon Retail Construction. “People are seeking out more options and want health care that is closest to them.”

Why Malls?

As much of retail has moved online, malls have one key commodity: space. And that space is getting more plentiful. According to Moody’s Analytics’ commercial real estate division, the mall vacancy rate in the first quarter of this year was a record high 11.4%.

Outpatient health care organizations can fill those spaces. The footprint of health care facilities can vary greatly. An urgent care clinic might fit well in a former bookstore. Other health care providers might require more square footage.

One Hundred Oaks mall in Nashville offers a case study for the ways outpatient health care facilities can revive a struggling retail space. Before 2009, stores were leaving and the mall was emptying out fast. Then Vanderbilt University Medical Center’s Vanderbilt Health facility moved in, taking up nearly half of the mall’s space. The new health care facility brought in foot traffic, which in turn attracted traditional retailers and breathed new life into the once-troubled shopping mall.

More Medical Malls?

The number of Americans 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, according to data from the U.S. Census Bureau. Demand for health care services should grow as the population ages.

Considering the benefits that malls offer patients — accessibility, physical space and proximity to other retailers and activities — the potential for continued growth of outpatient health care facilities in malls is immense.

“We are seeing a demand for more outpatient facilities off the campuses of large hospitals,” Christensen said.

Expertise in building care facilities

Sturtevant-based Horizon Retail Construction is uniquely positioned to help shape the way vendors and buyers experience malls. The company has extensive experience transforming retail spaces to make them more conducive to the needs of both retailers and consumers. Horizon’s clients in the health care space include VillageMD and Walgreens, Oak Street Health, Benchmark Physical Therapy and Humana.

The project with Oak Street was particularly ambitious: Horizon was responsible for opening the Chicago-based outfit’s first two clinics in Memphis.

“We are proud to be involved in the Oak Street Health program,” Christensen said. “They provide a great service to the community.”

For a health care industry that is ever changing, Horizon’s ability to “mobilize rapidly,” as Christensen says, could be an asset. Horizon employs more than 150 superintendents — none of whom are subcontractors. That workforce creates a speedy response time to client needs.

“We have shown the ability to quickly adapt to tenant needs,” Christensen said. “Because of that we are valuable working for both small and large businesses.”

 

Source: Waco Tribune-Herald

Office, Retail Owners Look To Fill Vacancy With Healthcare: It Often Doesn’t Work

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Children’s National Hospital is one of several D.C.-area health systems looking to expand its footprint into more neighborhoods across the region, and it is taking advantage of record office vacancy to find new locations.

“Children’s National used this strategy to lease two floors at the Wonder Bread Factory office building, a Douglas Development-owned property in Shaw that became vacant after WeWork and other tenants moved out,” said Children’s Executive Vice President and Chief Strategy Officer Michelle McGuire at Bisnow’s Mid-Atlantic Healthcare Summit in D.C.

Douglas Development principal Norman Jemal confirmed to Bisnow that Children’s National leased the first two floors of the building, which total around 50K SF and were previously occupied by a nonprofit.

McGuire said the deal is part of Children’s National’s efforts to expand from its main D.C. campus into neighborhoods across the region to give more people convenient access to healthcare.

“The health system also leased 140K SF in the former Discovery Communications headquarters in Silver Spring, and it is opening facilities in Friendship Heights, Columbia Heights, Anacostia, Takoma Park and Prince George’s County,” McGuire said. “We’ve been thinking about needing to be in communities to address gaps in care and access to care and access to specialty care, so that drives the need to have a broader footprint.”

For some health systems, the coronavirus pandemic highlighted the importance of having locations in the community. Howard University College of Medicine Associate Dean for Strategy Outreach and Innovation Michael Crawford said he saw the most successful Covid testing and vaccination sites were ones within neighborhoods, rather than at large healthcare campuses.

“Folks are craving that intimacy between their providers and that’s helping inform how we look at an ambulatory strategy,” Crawford said. “Is that co-location? Yes, co-location is an attractive proposition when you think about how you can array services to meet the needs of the customer. Is that looking at commercial spaces? Yes, you have to take that into consideration.”

Johns Hopkins University & Health Systems Vice President of Economic Development Alicia Wilson said her organization is also looking at commercial spaces as a way to be closer to patients.

“We’re thinking about our growth and thinking about our utilization of leased spaces within commercial buildings, and how we have our patient care be closer to our patients and repurposing our facilities at traditional hospital centers for those things that must be done at the hospital site,” Wilson said.

The prospect of leasing to health systems is especially attractive to office and retail owners that experienced rising vacancy during the pandemic. Cushman & Wakefield Managing Director Matthew Sullivan said medical users have increasingly heard from these owners looking to lease space to them.

“A lot of asset classes, office and retail in particular, have had a tough go the last 18 months,” Sullivan said. “The ownership of those asset classes calls the healthcare crowd all the time and says, ‘Can we get medtail, put medical into retail?’ or, ‘Hey, I’ve a got commodity [Class-]B office, and 20% is a couple physicians, can we convert it?'”

While the landlords are expressing more interest, Sullivan said it is often difficult to convert office and retail space into medical use. He said the cost can be so high that the landlord would need to land a large user with a long-term commitment. He cited one example of this, MedStar Health’s 112K SF lease with Beacon Capital at D.C.’s Lafayette Centre in 2015, but he said those deals are few and far between.

“Overall, it’s unlikely those are successful without dramatic changes,” Sullivan said. “All the infrastructure things have to be created, and that becomes really expensive. On the surface it sounds easy: ‘Let’s get medical folks and stick them here, and there’s good parking in this shopping mall.’ But medical is not going to take down a 200K SF old Macy’s. There are a few cases across the country, but overall it’s more challenging.”

“Landlords that try to put medical users in the same building as traditional office tenants often find the two are difficult to mix,” Anchor Health Properties Vice President of Investments Elliott Sellers said. “We made the conversion bet selectively across the country, but you need to go into it assuming that your commercial tenants are likely going to leave,” Sellers said. “Those two uses don’t really coexist all that well when you have a law firm in one floor and you have sick patients sitting in the lobby. In all four of those cases, we’ve had almost all of our commercial tenants leave.”

Sellers said office landlords are better off bringing in medical real estate experts and trying to market the full building to healthcare users, but he said the conversion projects aren’t easy to execute.

“You layer in the complexities of design and mechanical systems and layout, and I think there’s probably more losers than winners when it comes to conversion, not just in D.C., but broadly,” Sellers said.

Douglas Development, which leased the first two floors of its Wonder Bread Factory building to Children’s National, is planning to fill the top two floors of the building with coworking office users.  The landlord is rolling out its new in-house coworking concept, The Mark, on the former WeWork floors of that building and two other D.C. buildings WeWork vacated in October, the Washington Business Journal reported. Jemal confirmed the plans to Bisnow and said he thinks Children’s National and the coworking space will fit well together in the building.

“We were able to secure Children’s Hospital, which is a great tenant, it fits in great for the neighborhood, and it serves the community,” Jemal said. “The days of everybody wearing a suit and tie in an office building are the days of yesteryear. Everybody needs to see a doctor at some point — that’s just the reality of life — and where better for it to be than in the community?”

Health systems are also looking to locate within mixed-use developments that have apartments, retail and other uses. Whitman-Walker just broke ground on its new healthcare facility on the St. Elizabeths East campus in Congress Heights. Whitman-Walker CEO Don Blanchon, speaking at the event, said his team has focused on how to integrate the facility with the rest of the development to make it a space that feels like part of the community.

“At St. Elizabeths, we’re going to do a bunch of workaround healthcare, there’s going to be a bunch of services there,” Blanchon said. “The real issue is: What’s going to bring the community in? How do we think about that space, what do we do for activation on the ground floor? What do we do for engagement? What do we do on the outside of the space? In dealing with our partner Redbrick, there’s been a lot more thought about this sense of community ownership and activation. Ten years ago, we just didn’t spend as much time on that.”

 

Source: Bisnow

Health Care-Centric, Mixed-Use Development In Fort Myers, Florida, Gains Traction With Land Deals

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More than three years after Hope Hospice and Community Services Inc. unveiled plans for a 46-acre, health care-centric development in Fort Myers, the mixed-use project has gained significant traction.

And with a trio of recent land deals involving more than one quarter of the total project, only five acres of Hope Preserve remain uncommitted. The three recent parcel sales, which sold for a combined $8.72 million, will result in three new medical office and physicians practices and a traditional office building.

Together, the new projects will contain 148,000 square feet of new commercial space. One of the new buildings, a two-story, 21,000-square-foot office building, will become the corporate headquarters for Stevens Construction Inc.

“Hope Preserve will allow us to be more central to all the areas that we serve,” says Mark Stevens, the company’s president. “And it’ll be a much more visible location for us. We’ve been in the same location for 16 years, and we love it there, but this was just a tremendous opportunity.”

The new 14541 Hope Center Loop quarters, which Stevens will own, will double its office footprint to 10,000 square feet. The balance of the space in the building will be marketed for lease by Fort Myers-based commercial real estate brokerage firm LSI Cos. Inc.

“The company plans to complete the building around the end of this year,” said Stevens.

Designed by Southview Studios, Stevens’ new offices will also contain a training room, indoor and outdoor team lounges, multiple bathrooms and a shower facility, conferences and offices that feature floor-to-ceiling glass.

Meanwhile, a second, medical office building also is slated for the 3.71-acre parcel that Stevens acquired for $2.1 million. There, Stevens intends to develop a 27,000-square-foot building. Completion is scheduled for late Spring of 2022. Radiology Regional has committed to lease the two-story building’s first floor, with LSI marketing the second floor.

Additionally, following its own $4.88 million land deal for 7.06 acres, Orthopedics Specialists of Southwest Florida intends to develop a building between 60,000 square feet and 80,000 square feet in Hope Preserve. Stevens is on tap to construct that building, as well, beginning sometime next year.

The final perimeter parcel of the project, at the intersection of Metro Parkway and Ben C. Pratt/6 Mile Cypress Parkway, was sold in mid-May to Hodges Mantz Properties LLC, an entity formed by a pair of Southwest Florida physicians.

Hodges Mantz paid $1.74 million for a 2.5-acre tract, which is zoned for a medical use, in Hope Preserve. LSI Cos. President Justin Thibaut and agent Christi Pritchett represented Hope Hospice, while VIP Realty Group’s Jack Liptak negotiated for the buyer.

The planned new buildings join The Preserve, a continuing care retirement community with assisted living, skilled nursing and memory care units, at Hope Preserve.

Thibaut notes that with the activity, only 5.1 acres remain available within Hope Preserve. Owner Hope Hospice, which acquired the property in 2010, also is likely to build a hospice house on the site eventually. The end-of-life, nonprofit provider today care for roughly 4,000 people daily.

At least one restaurant and a 124-key hotel also are planned for Hope Preserve. The hotel replaces 92 apartments that were originally envisioned for the development.

All of the activity comes as Gulf Coast Regional Medical Center is completing a $315 million, 275-bed expansion less than a mile away. Thibaut expects the hospital expansion’s draw to only intensify when it opens in the coming months.

“Hope Preserve is in a prime position for users who are looking to be near a major medical center,” Thibaut says. “There’s really been a resurgence of medical office users to areas where retailers traditionally would go.”

Stevens believes his growing firm and the growth at Hope Preserve will dovetail nicely. The company, which operates four offices in Fort Myers, Sarasota, Tampa and Orlando and specializes in health care and hospitality projects, currently has 39 separate projects under construction valued at $94 million, with another $152 million set to begin within the next year.

“The market in Southwest Florida is growing, and with projects that are in many cases are larger in scale and scope than ever before,” Stevens says. “That’s been especially good for us and allowed us to grow right on the targeted pace we’d set a couple of years ago. And with Hope Preserve, we’re just super excited to be on the ground floor of such a dynamic project.”

 

Source: Business Observer