Not too long after the ICSC rebranded its name, US malls have registered the largest quarterly spike in vacancies since 2009. According to Moody’s Analytics, US mall vacancy reached 11.4% in Q1 2021, from 10.5% in Q2 2020. A number of avenues have been taken by mall operators to circumvent the void of retailers, including experiential retail, and now leasing medical or dental tenants.
It won’t be too long before people start seeing urgent care facilities, MRI and radiology offices, medical laboratories, and even hospitals inside their favorite malls. Mark Hunter of CBRE attests the new phenomenon to increased leasing velocity over the past six months as mall owners scramble to strategize their game plan amid the evolving mall landscape.
“From an industry perspective, it’s probably hundreds of deals now,” Hunter said of medical leases at malls. “If you look at the aging baby boomer population, which I’m part of … we’re going to need those medical facilities. I think they’re answering that demand. I think you’re going to continue to see that.”Mark Hunter
Studies reveal that tenants such as dental offices have actually increased foot traffic within malls rather consistently. But what also influences the move into malls is the ongoing desire by medical facilities to get closer to their patients, and capitalize on empty retail space, as the need for more labs grows due to the pandemic. Understanding what the consumer needs—all under one roof—becomes crucial for mall operators to see a bounce-back in tenants, foot traffic, and ultimately their revenue. Where malls with a movie theater component can correlate higher foot traffic to weekend movie releases, they can also begin to count on medical or dental facilities to drive foot traffic during regular Monday-Friday, 9-5, business hours.
According to the JLL Retail Report, there is already 11% of retail space being ‘earmarked’ to be redeveloped for medical spaces, with 3% said to become distribution centers. For example, a Pennsylvania based retail investment trust finalized a lease with Cooper University Health Care for 165,000 SF of what was formerly a Sears at the Moorestown Mall in New Jersey. Additionally, 81,000 SF in New York at the Wilton Mall—also former site to a Sears—was leased by Macerich to make way for medicine.
“Going to the doctor is typically not the most fun thing to do. Medicine is incredible for retail. We like foot traffic. It’s not an old dodgy doctor’s office, it’s very hip, it’s very modern. We’re trying to be able to take advantage of vacancies to grow.”