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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

Related Cos. Buying Stake In CareMax To Develop Senior Health Centers

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Related Companies is acquiring up to a 9 percent stake in Miami-based health care provider CareMax, with plans to develop about 75 senior health centers in underserved areas nationwide.

Related bought $5 million of CareMax stock, at a price of $10 per share as part of the agreement, and will serve as an investor, advisor, developer, and even as landlord of CareMax health centers, The Wall Street Journal first reported. CareMax or its affiliates will operate the new facilities, according to a press release.

“Quality healthcare is essential for all communities to thrive,”Bryan Cho, executive vice president of Related Companies, said in a statement. “We chose CareMax to help expand their reach because their fully integrated model is uniquely positioned to address the systemic issue many low-income seniors face.”

Cho will join the CareMax board of directors as part of the deal.

The Hudson Yards developer also received warrants to purchase up to 8 million additional shares at $11.50 per share, which can be exercised based on when the new medical centers that Related helped create are opened, according to the release.

“CareMax serves 65,000 people with its 42 Florida medical centers — about 22,000 of which are seniors — and will use the investment to expand its centers into Texas, Tennessee, New York and other states,” Ben Quirk, chief strategy officer at CareMax, said in a statement to Commercial Observer.

Three initial facilities have plans to open in 2022: a 8,000-square-foot spot at 651 River Avenue in the Bronx Terminal Market; a 5,000-square-foot outpost at 17-31 Seagirt Boulevard in Ocean Park Apartments in Far Rockaway, Queens; and a 27,000-square-foot spot on 1915 3rd Avenue in East Harlem, Quirk said. The leases are long term, though Quirk would not comment further on the terms.

The Miami health care company, founded in 2011, plans to open a total of 75 new centers in the next three years. Its residents pay monthly subscriptions through Medicaid and Medicare for health care, rather than fees based on individual office, clinic and hospital visits, per WSJ.

Related Companies, which got its start as an affordable housing developer after its founding in 1972, pointed to a growing need to serve affordable housing residents, who tend to age where they are rather than move, according to WSJ. The landlord, which owns 60,000 affordable housing units in 24 states, views health centers as a source of demand for flagging downtown retail spaces.

“Together with Related we saw that there is a profound nationwide need for medical and social care within and convenient to affordable housing communities,” Carlos de Solo, president and CEO of CareMax, said in a statement. “We engaged Related as our real estate advisors to assist us in locating our de novo medical centers directly within and near to these affordable senior communities nationwide.”

 

Source: Commercial Observer

Suburban Medical Office Pricing Is At A Premium

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As investors moved toward real estate sectors with better growth opportunities, they turned towards the medical office sector.

Now pricing is at a premium relative to suburban offices, according to an analysis by Real Capital Analytics.

From Q1 2016 to Q1 2021, medical office cap rates averaged 20 basis points (bps) lower than suburban offices. However, in Q1 2021, that spread increased 25 bps, as medical office properties had a 6.5% cap rate across the US.

Suburban office and medical office haven’t always diverged. For example, from 2002 to 2015, there was no discernable spread between cap rates for suburban offices and medical office buildings, according to RCA.

Not surprisingly, prices for medical offices have also held up better than suburban offices through the pandemic. While RCA CPPI for suburban offices declined at a 0.7% year-over-year pace into Q3 2020, it posted a 2.7% pace of growth into Q1 2021.

For medical offices, the volatility wasn’t as great. The RCA CPPI for medical offices hit a low of 2.5% annual growth into Q3 2020 but stood at a 2.8% pace by Q1 2021.

“The investors have been more optimistic about the medical office sector, understanding that an aging population requires more medical intervention,” according to RCA’s Jim Costello.

Medical office deal volume was also more robust through the pandemic. In Q1 2020, medical office deal volume fell only 41% year-over-year. By comparison, suburban offices suffered a 64% decline.

While suburban office may not fare as well against medical office, it has outperformed urban office. Its growth accelerated to a 3.6% annual pace in March, while urban assets declined by 2.4% year-over-year, reflecting a continuing trend of suburban outperformance in the sector, according to a separate analysis from Real Capital Analytics.

 

Source: GlobeSt