CREJ - Healthcare Properties - April 2018
Retailers and health care providers have responded to the evolving health needs of consumers for over a decade, but there is enormous room for improvement. There is not a single approach to retail health, wellness and medical retailization, however, with its neighborhood access, each project has the opportunity to create economically vibrant clusters focused on lifestyle. Retail owners should be cognizant of the health and lifestyle driven formula by combining healthy dining options, wellness services, medical services and personal services. This fresh combination of retail use cannot be replicated in an online format. Reimagining and transforming dated centers into one-stop health and wellness centers provides retail investors stable tenants with favorable lease terms. Colorado’s Front Range urban corridor is a regional hub for health and wellness. According to Metro Denver Economic Development Corp.’s Industry Report, “Demand for health care and wellness services is expected to increase due to a growing and aging population, a higher prevalence of chronic conditions such as heart disease and diabetes, and changes in residents’ behavior and lifestyle choices.” Retailers must respond to the growth trajectory and market demand in order to remain competitive and relevant. Navigating the competitive marketplace and determining success is daunting. Following three key strategies enables you to stay competitive and reduce vacancies, which ultimately yields higher return. • Consult with a retail health and wellness expert. Your strategy should begin by engaging a real estate team, which provides critical analytics, understands the market influences beyond mere supply and demand, is consumer focused like a retail owner and, lastly, has a specific understanding of the variety of health care sectors and how partners can enhance and/or anchor the center. By creating a tenant mix strategy that promotes health, happiness and well-being, this real estate sector is equipped to meet the needs of evolving consumer demands. In consulting with an expert, retail owners will understand the needs of future consumers as they rethink the role of the center and how their strategy is vital to long-term success. • Understanding the changing consumer. According to the Nielsen Strategic Health Perspectives study, 87 percent of U.S. adults are engaging in some activity to proactively manage their wellness or to address an existing health issue. Taking the time to understand demographics and key factors driving consumers is the beginning of a robust retail health and wellness strategy. Key factors include: age consideration: baby boomers or millennials; promoting wellness or mitigating chronic health issues; household income and median home value; disposable income; medical insurance coverage; service offered, product or experience; and health care spending. In North America, the wellness community market is worth an estimated $52.5 billion, with an annual growth rate of 6.4 percent. Globally, it is valued at $134 billion and is expected to reach $180 billion by 2022, according to Fast Co. CMS reports the overall share of gross domestic product related to health care spending was 17.9 percent in 2016. In 2017, the Front Range posted a low retail vacancy rate of 4.6 percent with a 5 percent increase in average rents. Capitalizing on projected growth by considering key factors will contribute to retail real estate sustainability and expansion. • Rethinking the role of the asset. Providing a one-stop convenience for consumers offering food, fitness, health and fun reduces the need for shopping around and increases center synergy. Encouraging a tenant mix provides the opportunity for business collaboration and referrals without the need to leave the center. Promoting cross-branding and tenant collaboration inevitably drives more traffic. While offering a variety, maintaining a complementary theme among the center will provide a one-stop effect for the consumer. There are many retail malls that have utilized health and wellness to revive the asset. Vanderbilt Health leased 450,000 square feet at the One Hundred Oaks Mall in Nashville for 22 clinics, a pharmacy and lab. The Atrium Mall, near Boston, transformed into a health, wellness and medical destination with the help of a 286,000-sf Lifetime Fitness center. Transitioning a retail space solely for use as a health care space provides challenges to owners such as frequently changing regulations, hefty build-out costs and security. Owners and operators of large centers are hesitant to invest in such projects given the ever-changing health care landscape. With that in mind, diversifying the market space offerings within a center lends itself to less long-term risk and overall costs. Some considerations for sole health care use are: proximity to major medical centers, urban vs. suburban, does the provider emphasize customer service and experience, and the percentage of private insurance vs. Medicare and Medicaid in the area. There is tremendous opportunity for the health and wellness health care real estate and development community. Following the considerations presented when determining retail health and wellness space will improve your experience, reduce vacancies, provide owners with a competitive market stance and ability to meet the demands of the consumer.