Doctors Putting a Pulse Back into Shopping Malls

As we see more and more department stores close, we hear more and more of what they can be converted to. Many of these department store chains, like Sears and Macy’s, own their real estate. As they shrink their footprint, they are therefore able to trade their space to the mall owners who can then divide and adapt the space for other uses.

One of the most intriguing readaptations to emerge is the introduction of medical and dental tenants to the mall’s portfolio. These medical service providers operate alongside or, in some cases, entirely replace, conventional stores.

This trend has strengthened in part because desperate mall owners are able to capitalize on medical tenant’s creditworthiness and willingness to sign long-term leases. These tenants have a higher staying power than your average retailer considering the high capital cost of their buildouts, the large expense of relocating specialized equipment, and the fact that there will always be a need for healthcare. Landlords therefore find that these tenants also have a strong motivation to stay put and are often willing to pay higher lease rates than the previous occupants. They also drive foot traffic and can therefore help keep occupancy high.

From the healthcare provider’s perspective, shopping mall space is ideal because of the convenient location to their customer base. Malls are typically centrally located amongst dense populations and often have large blocks of space available. In addition, the large ground-level floor plates can accommodate heavy medical equipment at a lower cost than would be the case for a multistory building. The re-imagining of the mall tenant mix has therefore worked in these providers’ favor as they are able to push into real estate that had long been unavailable to them. Experts predicts that these tenants will become a normal part of malls in the same way Apple stores and Tesla dealerships are today.

Article by: Kennedy Richardson, Market Strategist