When Welltower recapped its 24-asset medical office portfolio earlier this month, it proudly noted that 97% of the buildings were affiliated with health systems. This indeed is an important data point in calculating income streams and figures prominently in most acquisition criteria.
A new JLL survey, though, points to other criteria that should also be considered not only in acquisitions but also in the development of these assets.
In its study, JLL found that 83% of patients surveyed would eschew driving to a new or renovated facility to be near their care. In fact, 71% of respondents drove less than 20 minutes to their medical service. Only 36% checked reviews before their appointment.
“In dense, urban areas, healthcare competition is fierce, making it easier for consumers to find accessible care with public transportation and parking options,” said Jay Johnson, national director, JLL Healthcare Markets. “For rurally located patients, they’re likely more interested in cutting their drive time down than seeking a new facility so it’s unsurprising that they’re even less likely to check reviews than their urban counterparts.”
JLL’s 2020 Healthcare Real Estate Outlook says that high traffic and visibility, neighborhood proximity and parking access are common demand drivers for both the medical and retail sectors.
In fact, that intersection between retail and healthcare convenience is one of the drivers behind investor interest in urgent care clinics—and provides a good guide as to whether a healthcare facility will work from a location perspective.
“A lot of these urgent cares can rent a vacant Rite Aid or Walgreens,” Randy Blankstein, president of The Boulder Group told GlobeSt.com in an earlier interview. “They’re not like the old medical parks or office buildings. It’s a medical use in what we consider traditional retail space.”
These urgent cares could represent an opportunity for retail landlords who may have seen tenants depart or close their doors in 2020. Cap rates for urgent cares fell 12 basis points to 7.13% year-over-year in the third quarter.
“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.
In addition, the pandemic may have accelerated the public’s comfort with these urgent cares, potentially making them an even more viable option for landlords with vacant retail space. According to a report by UPshow, during the pandemic, 32% of consumers increased their use of retail health clinics, and 49% of respondents said that they are more likely to use a retail health clinic after the pandemic. From the healthcare provider perspective, 74% of executives surveyed said that traffic has increased during the pandemic.