Shopping Center Business

MAY 2018

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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HEALTHCARE RETAIL 256 • SHOPPING CENTER BUSINESS • May 2018 from fee-for-service and bundling of pay- ments and things of that nature. People are pushing for more prevention and less hospitalization because that helps them avoid costly stays and procedures." Breeze adds that she expects online platforms to eventually emerge as forms of healthcare delivery. But until that tech- nology gains a foothold, retail locations will continue to draw healthcare users. The growing demand for retail space from healthcare tenants means that landlords can push rental rates higher. But Breeze believes the retail visibility and access are worth the heftier rates. "In general, rents are about 20 to 25 percent higher for being in retail centers as opposed to MOB developments," she says. "A professional medical building near a hospital typically has more attrac- tive lease rates. But in our line of work, we don't have the luxury of picking our real estate. We have to go where the people are." LANDLORD PERSPECTIVE Healthcare real estate has long been regarded as a defensive property type that can weather economic downturns and legislative changes. This perception of the asset class stems largely from the "stickiness" of its tenant base. In other words, healthcare operators don't like to relocate. Therefore, they are more inclined to sign and renew long- term leases and position themselves as stable tenants. Investors and developers of pure-play healthcare properties appre- ciate that commitment. And so too do retail investors and land- lords. According to Brenna Wadleigh, CEO of Dallas-based retail developer N3 Real Estate, which houses several urgent care, primary care and dental practices within its centers, the tendency of health- care users to stick around appeals strongly to shopping center owners. "A lot of landlords are starting to realize that healthcare users have higher renew- al rates for five- and 10-year leases than most other tenants," says Wadleigh. "In addition, lenders like to see the stable cash flows of healthcare tenants when underwriting a new loan for a property. Both sides really see the arrangement as a benefit to the center." Wadleigh's firm has developed six retail centers in Texas that currently house med- ical or dental users. These tenants have shown a willingness to spend heavily on their build-outs, says Wadleigh. While healthcare providers tend to ask for more money for tenant improvements than other retailers, their build-out budgets can run into the hundreds of thousands, Wadleigh points out. "That's a big investment that really en- courages them to stick around," she says. Healthcare providers have gradually woven their way into retail settings, in many cases enabling them to grow their franchises and elevate their creditworthi- ness. The strong credit ratings of these healthcare tenants generally make it easier for landlords to boost their rents. That leverage, combined with the desire of healthcare tenants to remain in one place, makes them highly attractive ten- ants to landlords. Some people consider doctor and dentist appointments to be destination errands — a trip that exists in isolation and ANCILLARY RETAIL SPECIALTY RETAIL • POP-UP • ENTREPRENEURSHIP • SPONSORSHIP • MARKETING TM POP-UP RETAIL IN PLACE TARTINERY AT BROOKFIELD PLACE NY Premiere Issue — May 2018 Ancillary Retail provides the industry with relevant news, best strategies and practical tips to help developers and retailers incubate, grow and sustain successful businesses in both traditional and alternative shopping environments. • Retail property owners and managers • Specialty leasing managers • Third-party leasing agents • Retail tenants — from RMU/kiosk retailers and mom & pop operations to national retailers • Seasonal, pop-up & incubator retailers • Restaurant concepts & food trucks • Airport concessionaires and managers • Manufacturers and service providers • Contractors Subscribe at ADVERTISE Scott France Debbie Huard President, France Media Inc. Publisher (404) 832-8262 (404) 832-8262 Want to Contribute? Contact Debbie Huard at Pick up your copy at SPREE Booth #526 Who reads Ancillary Retail magazine?

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