More and more retail spaces are showing up vacant with the pandemic increasing financial distress on tenants. Net lease investors are capitalizing on the ripe medical sector, which has growing needs for lab space. As you can probably guess, new labs and urgent cares are filling the voids left by vacated retailers.
Urgent cares or medical facilities that operate out of your traditional retail spaces are becoming more prevalent as vaccines are now being administered. However, the pandemic has made it more difficult for traditional private-practice doctors offices. Real estate investors who are savvy enough to protect their earnings have been constantly looking for ‘safe havens’ as property types such as multifamily, single-family, and commercial are facing challenges. Urgent cares are starting to act as the safety net for investors, now, because of the demand.
“You don’t want to take a smaller local doctor practice versus a national credit company in this space,” says Randy Blankstein, president of The Boulder Group. “People went for the larger, higher credit deals as this whole flight to safety happened.”GlobeSt.com
Urgent cares offer more options to the population when it comes to seeking medical attention. And Blankenstein affirms that hospital-backed urgent cares can greatly benefit from the visibility of empty retail spaces such as a former Rite-Aid or Walgreens.
“Urgent cares are a relatively new entrant to this space. Many practices are in retail spaces, which are called medtail. ‘A lot of these urgent cares can rent a vacant Rite Aid or Walgreens,’ Blankstein says. ‘They’re not like the old medical parks or office buildings. It’s a medical use in what we consider traditional retail space.’”
This can be huge for retail landlords who have suffered the vacancy of tenants in one of these spaces. Furthermore, CAP rates for urgent cares fell 12 basis points to 7.13% year-over-year in Q3.
“These health clinics and urgent care things are positioned to backfill space for a variety of tenants who are downsizing or shifting format,” Blankstein says.
“Their opportunities to get into kind of prime real estate with discounted prices certainly exists,” Blankstein says. “That’s part of their business model. They want to be more convenient and easier to find than a hospital and as a replacement to a doctor’s visit, occasionally.”