The Village Market shopping center on Highway 100 in Hales Corners is a good example of how health care tenants have become increasingly important for filling spaces in retail buildings.
Located at 5760-5810 S. 108th St., the shopping center is anchored by a 61,665-square-foot Pick ‘n Save grocery store. Village Market also has four health care-related tenants – known in the retail real estate industry as “medtail” – including Paramount Pediatric Dentistry (occupying a former Blockbuster Video space), Orthodontic Experts (in a space formerly occupied by a U.S. Cellular store), The Joint Chiropractic (in a space formerly occupied by YoFresh Yogurt Cafe) and Team Rehabilitation Physical Therapy (in a space formerly occupied by Super Cuts and Papa Murphy’s Pizza).
The presence of “medtail” tenants in retail shopping centers isn’t new, but it is growing, retail real estate industry experts say, as health care-related operations increasingly seek out retail spaces and retail building owners take advantage of that interest to fill vacancies in their shopping centers.
Health care-related operations including dentists, orthodontists, chiropractors, physical therapists and others have become increasingly interested in locating in retail shopping centers, in large part because they offer convenient and highly visible locations with plenty of parking and an opportunity to display large signs for passersby to see, retail real estate experts say.
Traditionally, those tenants were often located in multi-tenant medical office buildings, where they had to share common areas, including bathrooms, and were not highly visible to passersby.
“I think there’s an increasing want by these practitioners to have a storefront and some of the conveniences that go along with it,” said Kevin Schmoldt, managing director for Newmark in Milwaukee. “Direct access from a parking lot, as opposed to being in a medical office building with common areas and shared restrooms, elevators and corridors. And I think there’s also an increasing desire for branding, more than ever. Single occupiers are more brand focused than they were in the past, to have a storefront sign instead of just being on a reader board or a directory inside of an office building.”
The number of medtail tenants in retail spaces has increased dramatically since the COVID-19 pandemic, when many retailers were struggling to deal with health and safety restrictions while demand for health care services increased, Schmoldt said.
Health care-related operations have taken advantage of opportunities to fill smaller retail space vacancies that have emerged in recent years.
“The spaces were occupied years ago by your independent footwear guy and your specialty clothing guy and your menswear and your small independent retailers that just don’t exist anymore as a result of (competition from) national-branded, big-box retailers,” said Dan Rosenfeld, principal of Mid-America Real Estate – Wisconsin. “We clearly are seeing less retailers selling shirts, slacks and sweaters. When you look at the merchandizing mix of your traditional retail shopping center, that mix today of service retail and medtail tenants is significantly greater than it used to be.”
Retail building owners have become more willing to accept health care-related tenants in their shopping centers, Schmoldt said. Many landlords have dropped requirements for tenants to be open every day and the number of hours they must be open, he said. For shopping centers, medtail tenants help bring in more daytime traffic during weekdays.
“For a shopping center that had more restaurants or more retail service-based tenants and was busier on nights and weekends, that may have been slower during daylight hours. Now, if you add a medical tenant or two into that lineup they can drive more traffic during the business hours during the weekday,” Schmoldt said.
And what’s more, medtail tenants can help drive foot traffic to adjacent businesses as patients or their caregivers look to shop and dine.
“I think we’ve seen traffic transfer, most particularly with individuals that need to be transported. You’re going with a spouse, a family member or a caregiver, so adjacent retail allows for traffic transfer,” Rosenfeld said.
Another thing that retail property owners like about medtail tenants is that they tend to make large capital investments to build out their space and, therefore, are less prone to move to a new location, retail industry experts say.
“It’s perceived to be a very stable category, where the barrier to entry is pretty high,” Schmoldt said. “It costs a lot to build out a medical practice, in any type of building, so when they build a medical practice like a dental office, for example, they are less likely to relocate after five or 10 years once the initial lease term has expired, as compared to somebody who might be selling widgets who could pretty well relocate and build out inexpensively.”
Schmoldt estimates that about 15% of retail space in Milwaukee-area shopping centers is now occupied by medtail tenants, which he says is probably about double from three to five years ago. The presence of medtail tenants at area shopping centers “is becoming larger and larger,” Rosenfeld said.
