Medical Tenants in Retail Centers

Medical users in retail centersOver the course of the last several years, Medical Tenants became increasingly popular in retail shopping centers. With the expansion of urgent care clinics, dental offices, chiropractors, family practitioners and other ancillary medical uses, the Medical Tenant has formed a strong bond with retail shopping centers. Tenants such as The Joint, Fast Med Urgent Care, East Valley Urgent Care, Pacific Dental Services, and Aspen Dental compete for prominent retail spaces.

Why is Medical Use a Good Fit for Retail Center?

Retail Shopping Centers tend to suffer from a dead time, Monday through Friday between 9 am and 3 pm while dental and doctor’s offices are the busiest from 9 am to 5 pm on weekdays.   A compliment exists between the shopping center busy times and the Medical tenant busy times.  The additional center traffic during a dead time benefits all the other shopping center Tenants by creating additional foot traffic during hours typically slower for retailers.  Parents can drop their kids at the dentist and easily get some shopping done while they wait for them to finish the appointment.

Challenges Leasing to Medical Users

Leasing to medical users produce several challenges.  Medical Tenants relocating from the medical office environment are typically accustomed to lower rents and higher tenant improvement allowances.  Often times, medical leasees ask for significantly more improvement allowance than a typical retailer would for the space conversion.  This can have a significant impact on a shopping center owner’s budget for re-leasing of a space.    Tenants also tend to feel pressure from increased rental rates in the transition from office buildings to retail centers, even though these Tenants have benefited from the increased exposure gained from the retail environment.     Additionally, advanced approval may be required by the restrictions mandated by regional and national big box retailers.

Benefits of Leasing to Medical Uses

In addition to the increased traffic in non-traditional retail hours, leasing to medical tenants have several benefits for Landlords.  First, medical office users have been viable single tenant replacements for larger vacancies left by the bankruptcy of Blockbuster and Hollywood Video.  Second, the medical tenant credit profile is very strong, often including doctors or strong multi-unit corporations guarantees on the  lease documents.   Third, medical users spend significant amounts on build-out for their space, securing long term tenancy for the building while increasing the value for a future replacement tenant.

In conclusion, medical Tenants have taken advantage of the recession to fill vacancies, and they are here to stay in the retail world.  As medical practice becomes increasingly more competitive, the enhancement a retail center can give to a medical user can provide a one up against their competition.  We look forward to medical tenants’ continued expansion into the retail world.

Kalen Rickard |  Senior Associate | 602.778.3832