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Spirit Halloween executives aren’t the only ones scouting out shuttered department stores this fall: Health system leaders are also eyeing up empty retail and office spaces to expand outpatient offerings and reach new communities.
While it may seem weird for patients go under the knife at a location that once sold knives, Jim Crispino, the healthcare leader at design firm Gensler, told Healthcare Brew that the “medtail” phenomenon—a trend in which healthcare providers open shop in former retail spaces—makes sense both financially and operationally.
“There’s a lot of overlap in terms of how they position themselves,” he said.
Both retailers and healthcare providers “use very similar models” that focus on things like visibility, accessibility, and transportation access when determining facility locations, Crispino said.
Medtail also benefits from two other trends: healthcare leaders’ longtime push to expand outpatient offerings via ambulatory surgical centers and urgent care facilities, and the rash of commercial bankruptcies and retail closures related to the Covid-19 pandemic.
Health providers are also snapping up empty office spaces, which experienced record-high vacancy rates of about 20% as of early 2023 due in part to remote work opportunities, according to JLL’s Office Outlook report. The real estate and investment management firm ranked the health industry fourth out of 20 sectors for trailing 12-month leasing activity in the first quarter of 2023, behind banking and finance, technology, and legal services.
Gensler, for example, helped transform a 100,000-square-foot Clifton, New Jersey, office building into a Summit Health and CityMD multispecialty hub. That facility, which opened in October 2022, features outpatient medical offices across 18 specialties, as well as an urgent care center.
The firm is also converting a former Crate & Barrel in Bridgewater, New Jersey, into a 34,000-square-foot ambulatory care center.
Crispino said existing space is “almost always going to be more cost-effective” than new construction—particularly when it comes to healthcare facilities, which are some of the most costly buildings to construct.
A New York City high-rise office building, for example, can cost about $600–$800 per square foot versus $1,400–$1,600 per square foot for a hospital, he said. However, construction consulting firm Rider Levett Bucknall estimated that healthcare construction in New York City costs closer to about $600–$900 per square foot compared to $400–$900 per square foot of prime office space.
“If you can find a building that already exists, and what you’re doing is fitting it out, you’re putting these [technology] systems in place—and they’re expensive, for sure—but the building itself is 40%–45% of the cost. That’s also factoring into the equation,” he said.
Crispino said Gensler architects and designers assess a building’s configuration—including things like elevator location, column spacing, and ceiling height—to determine what health services it could easily provide.
Buildings with high ceilings, he said, can be good for surgical and imaging services because they can easily fit large MRI and CT machines, whereas spaces with lower ceilings are better for primary care or specialty visits.
Further, the strategy for converting former commercial or retail spaces to healthcare facilities can be much different in urban locations compared to rural areas where hospitals have closed in recent years. Making spaces more flexible can let healthcare providers better address social determinants of health, like housing and nutrition, and hence improve patient outcomes for the community as a whole, Crispino offered.
“In New York City, you can convert a retail space to a healthcare space, and it can be a healthcare space 24/7,” he said. “In a rural community, the strategy may be that it’s a community health center on Tuesday and Thursday; it’s a multispeciality clinic on Monday, Wednesday, and Friday; and it’s the community center on the weekends.”
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