Shopping Centers Today

SEP 2017

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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10 S C T / S E P T E M B E R 2 0 1 7 T H E C O M M O N A R E A H ealth care systems continue to broaden their retail footprints, a trend that benefits landlords across the U.S. "There has been incredible growth in the health care sector, and it has become creative in the way that it utilizes real estate," said Ankur Gupta, a Chicago-based partner with the McDermott Will & Emery law firm and a specialist in health care property transactions. "Health care systems want to move into established population centers, and, simultaneously, there has been a decline in retail usage, largely because of e-commerce. So it's a perfect storm." Health care's growing retail presence spans the service spectrum, from primary-care facilities to outpatient surgery facilities. Neighborhood urgent-care centers, which typically occupy about 3,000 square feet, have made the most By Joe Gose Health care operators a go-to tenant source for retail landlords LE A S I N G impact on retail centers, however — expanding to 7,357 in 2016, from 6,003 two years earlier for an average annual growth rate of 11.5 percent, according to the Urgent Care Association of America. Though the association is not predicting whether that pace of expansion will continue, a survey it conducted last year found that 90 percent of urgent-care operators intend to grow. Many plan to expand treatment options beyond X-rays and other fundamental tests and services. Meanwhile, some $1 billion in new micro-hospital development is under way in 15 states, according to Transwestern's health care advisory- services group. Designed to fill the gap between the urgent-care and conventional hospital formats, micro- hospitals typically measure some 35,000 square feet and have about 10 to 20 beds. Hospital systems have generally focused on greenfield development, although they often target areas where the surrounding retailers have established traffic, says Eric Johnson, national director of Transwestern's health care advisory practice. "Landlords certainly are more comfortable with urgent-care requirements," he said. "The majority of micro-hospitals will remain ground-up developments outside of the shopping center setting." Health care systems have also targeted malls and lifestyle centers for large outpatient clinics, such as the Cedars-Sinai Health System's 32,000-square-foot facility at the Runway Playa Vista, Los Angeles, and the Vanderbilt University Medical Center's 440,000-square-foot medical pavilion at 100 Oaks Mall, Nashville, Tenn. The health care sector's retail repositioning is only in the third inning, suggests Bryan Lewitt, practice leader for CBRE's health care services group, in Southern California. "Only 10 percent of health care is in retail right now, and I think that number is going to double," he said. "Here in Southern California, the only place for many of the requirements we have is in shopping centers." One of the largest urgent-care operators, Optum, a division of UnitedHealth Group, has expanded its retail presence by acquiring urgent- care provider MedExpress in 2015 and ambulatory surgical center operator Surgical Care Affiliates this year. In less than 12 months, Optum has increased its portfolio of OptumCare centers to roughly 250 across 17 states, from 135 across 11 states. It is leveraging the acquisitions in pursuit of a plan to expand into 75 markets, according to statements from Andrew Hayek, former chairman of SCA who is overseeing OptumCare. "While we have a presence in many of those markets, that presence isn't complete," Hayek said. "So I would say we continue to be in the very early stages of where OptumCare wants to be." n

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