Retail medicine gobbles up empty space in shopping center storefronts
With video stores and retailers closing their doors, retail real estate has had a tough half-decade. The cure? Urgent care clinics.
The clinics, storefronts staffed with doctors to treat common ailments or minor injuries, are filling vacancies left by struggling retailers like RadioShack Corp. and Best Buy Co. as they close locations. They're moving into those street and shopping center fronts at their fastest pace ever, according to Scott Mason, managing director of Cushman & Wakefield's health care group.
In 2014, there was “an increase in retail medicine in all of its different dimensions,” Mason said in a phone interview. “You look for retail outlets with high visibility, high traffic patterns, and signage capabilities.” That approach, Mason said, is referred to as “the Blockbuster strategy.”
The number of walk-in retail clinics across the country has risen 20 percent since 2009, to 9,400 last year, according to the Urgent Care Association of America. Operators also see new demand for convenient health-care services as more than 10 million people are insured under the Patient Protection and Affordable Care Act.
Medical tenants pay higher rents, have good credit and tend to sign longer leases, said Dave Henry, chief executive officer of Kimco Realty Corp. in New Hyde Park, N.Y. Last year, his company signed 40 medical leases, an increase from 34 in 2013 and 27 in 2012. “For us as a large landlord of lots of shopping centers, it's nice,” he said.
For customers, the clinics fill a gap. Patients who can't get a last-minute appointment with their doctor or don't have one can turn to urgent care instead of overcrowded hospital emergency rooms.
When Kelly Davis' son woke up days before Christmas with a fever and vomiting, the 33-year-old mother of two's pediatrician's office was closed and her child didn't seem sick enough for the emergency room. Instead, she went to a clinic.
“It seemed more effective than going to an ER,” said Davis, who lives in Baton Rouge. “We just needed to make sure it wasn't going to get worse before Christmas.”
Research suggests the growth in walk-in clinics still hasn't outpaced demand. Reliance on the ER has increased under Obamacare, in part because people in remote or urban areas don't have access to enough primary-care doctors, a Wayne State University study found this month.
The real-estate market, meanwhile, is still recovering from the 2007 recession and consumers buying more goods online, which has left prime locations up for grabs for companies such as City Practice Group of New York, whose 39 clinics include a former Blockbuster location in Nanuet, N.Y.
“We see those as opportunities to fill a void,” said Nedal Shami, City Practice's chief operating officer. “We see it ... almost like a bank, and want to be on Main and Main on the corner.”
Vacancy rates at malls hovered at 7.9 percent this year after peaking at 9.4 percent in the third quarter of 2011, according to REIS Inc. That's still significantly above the 5.6 percent rate in 2007. Neighborhood and community shopping centers are slowly climbing back as well, with a vacancy rate of 10 percent this year.
The rise of clinics has influenced the job market, with employment in outpatient centers such as urgent care growing by 20 percent since 2010, according to the Federal Reserve Bank of St. Louis. That compares with a 7.2 percent increase for general health care jobs and 6.9 percent for all non-farm jobs.
Private equity firms and venture capitalists have poured more than $3 billion into urgent care clinics since 2010, according to Pitchbook, a research firm.
Some Obamacare plans offer cheaper monthly premiums in exchange for high deductibles, which may steer more patients to urgent-care clinics. While it cost about $94 to treat a sore throat at a local urgent care center in 2013, treating the same symptoms would total more than $590 at an emergency room, according to CareFirst Inc., a Maryland health insurer. Flu treatment at a retail clinic cost around $128; the same procedures would total $804 in an ER.