Over the last several years, urgent care and other medical tenants have been among the most active users of retail real estate. In fact, according to a 2020 ICSC research report, nearly 70% of U.S. adults have visited a healthcare provider located in a shopping center as retail medical tenants, or “medtail tenants,” continue to increase the amount of retail real estate space they occupy.
These tenants eschew hiding away in medical office buildings, waiting for their patients to find them through a maze of staircases, elevators, and unremarkable suite number directories. Instead, their branding and signage stand out, competing for attention in heavily-trafficked shopping centers or even freestanding buildings with high visibility. Urgent care operators, dentists, physical therapists, and fitness professionals have paved the way for a new kind of consumer experience: one that prioritizes access and convenience.
However, finding quality sites with access and convenience remains a challenge for the tenants themselves in a resurgent market with low vacancy. As we wrote back in September, the suburbs recovered from Covid quickly, and retail occupiers flipped the switch back to deal making. We’re seeing steady activity across all nine of our offices exceeding pre-pandemic numbers.
So what is the answer for medtail users who want to grow in retail settings?
Sourcing retail sites requires retail real estate expertise.
When Shannon Older (Managing Partner – Albany), began working with WellNow Urgent Care five years ago, she immediately noted the similarities between their real estate strategy and that of a traditional retailer’s. “They have clear branding and want prominent signage, and they specifically didn’t want to be in office parks because of the inconvenience to customers,” she said.
WellNow, previously known as Five Star, started working with Shannon back when they only had a handful of locations. As they grew, they partnered with a local hospital who wanted to expand into urgent care but didn’t have site selectors or a retail strategy in place. Atlantic’s Albany team helped develop the real estate strategy for Eastern New York, having opened 16 units for them with another seven in development.
“For us, their requirements didn’t present any unusual challenges because their needs so closely match our retail clients’ needs. We know when things are shifting — what’s coming or going that will change where the traffic drivers are and where the gravity in the market is,” said Shannon.
“As brokers who focus on retail real estate, we know where retail is trending,” agreed Roy Crain, Managing Partner in Atlantic’s Charlotte office. “This specialization allows us to source opportunities that may not be obvious to the naked eye…or sometimes even to the property owners themselves.”
His work with Heartland Dental over the past eight years has balanced their requirements for traditional retail space, like new growth and grocery, with their unique identity as a tenant with a wider range of customers — “Everyone needs a dentist,” Roy noted — and different operating hours.
Evan Clements, who represents Spear Physical Therapy in Atlantic Retail’s New York City office, expressed similar thoughts, adding that retail-focused brokers “have experience with expansion plans and are generally more well-versed in pipeline real estate and rollouts.” Spear, operating since 1999, is one of the longer-tenured tenants in the space and has pointed to taking retail space as a factor in their growth and visibility.
But a tenant-focused real estate strategy is only half the battle.
Maintaining healthy relationships and open dialogue with landlords leads to better results.
Retail real estate is a maze of moving parts and strategic timing often with stakeholders beyond just the tenant and the landlord. Anchor-tenant use restrictions, shopping center regulations and zoning issues all combine to create a complicated puzzle to work through. This often leaves tenants frustrated — particularly new entries from the medical community who may have less experience in the retail industry.
Landlords represent the other side of every transaction, doing their best to lease space to tenants that will perfectly fit their site. Good brokers, with relationships across the spectrum, are well-positioned to not only advocate for the needs of their tenants, but also bring the perspective of all parties involved, allowing them to find common ground and clear hurdles. This advocacy affords a 360-degree view that not only leads to better deals, but healthier long-term relationships between tenants and landlords.
“Landlords have been recognizing more and more what Heartland Dental is about,” said Roy. “They attract people who are new to the area and want to build a long-standing relationship with a dental practice.” In addition, Heartland, like many other medtail tenants, has a lighter parking requirement and is not open on evenings or weekends.
Shannon, too, has noted a change in response over time. “In past years, there were use restrictions to contend with, but now landlords and other tenants see the benefits that tenants like WellNow bring to their centers.” Visitors to medtail tenants like urgent care centers are often one patient and one driver. While the drivers are waiting, they’re likely to eat or shop at nearby restaurants and retailers, leading to increased foot traffic.
Then, of course, there’s the stability of the tenants themselves. Tenants like Heartland Dental, WellNow, and Spear are well-capitalized with excellent credit, making them attractive additions to many centers. Further, like fitness and food, they are an “internet-proof” category insulated from the broader impacts of e-commerce that might have hit particular retail operators.
That stability has been thrust into the national spotlight in recent years, with the Covid-19 pandemic drawing a stark line of contrast between essential and non-essential operators. If anything, that only added fuel to the fire with medtail growing quickly as a user category.
While landlords might have once asked if there were any benefits to adding medtail into their tenant roster, the question has now become, “Who gets the space if there’s not enough of it to go around?”
Competition is likely to increase with more medtail users looking for retail space.
All three brokers we spoke with agree that medtail will continue to grow as a user category, particularly during the shockwaves of Covid variants as landlords work to mitigate the risk of businesses that would be devastated by another shutdown. Some established brands like WellNow, with over 100 open locations, are even expanding into new specialties like IV hydration therapy and allergy clinics.
Heartland Dental has continued their growth strategy, closing nine deals with Atlantic’s Charlotte team last year as part of their record growth of 424 new practices in 2021.
Others like Spear are just continuing their growth at a more rapid pace. Atlantic has assisted on nine deals on behalf of Spear with another six in the pipeline. “Before, they were opening a unit per year,” said Evan, “and now they’re looking to do between five and ten.”
However, new medtail concepts are growing in popularity, taking advantage of the unique blend that they create with retail in shopping centers. “Competition for space is certainly increasing,” he acknowledged.
This makes the rush to be first and grab any space available a tempting option.
Finding the right site — not the right-now site — should be the target.
Part of executing a best-in-class retail real estate strategy involves creating a site: being aware of off-market opportunities and identifying the best location, regardless of current availability. When convenience and access to customers are primary drivers, selecting optimal real estate is paramount even with the competing goal of getting open as soon as possible.
A good broker is able to take the guesswork out of the search, leveraging expertise, relationships with landlords, and knowledge of both new and upcoming opportunities to secure the best site for their tenant as quickly as possible. With medtail users having already made historic inroads into retail space, they should seek out the same level of access and convenience in their real estate strategy that they afford their customer.