Healthcare providers set up shop in malls

September 23, 2016
Arrived a little too early for your doctor’s appointment? Instead of flicking through a pile of outdated magazines why not browse the latest fashions in the clothes store next door.

That prospect is fast becoming a reality for a growing number of U.S. consumers as healthcare providers adapt vacant spaces in malls across the country.

While many will be small clinics with a handful of staff, others are much bigger operations, such as the 32,000 square foot space at The Runway at Playa Vista in Los Angeles which is set to become the new home for outpatient services including obstetrics, gynecology, and pediatrics from the Cedars-Sinai Health System.

The new mall tenants

Some types of healthcare services fit in well and thrive at malls. “Malls are great options for health insurers,” says Walter Wahlfeldt, Executive Vice President, National Retail Corporate Services, at JLL. The Affordable Care Act (ObamaCare) requires the uninsured to sign up for health insurance or pay a tax penalty. This has created great demand for health insurers who like the idea of tapping into the retail environment to gain customers.

“What’s nice about the malls are that they give healthcare businesses exposure to a lot of people,” says Wahlfeldt. “Think about the old model of insurance agents visiting you at home. That might have worked for an older generation, but younger people today hate that idea.”

Being able to walk into a mall storefront to speak with someone or just to pick up some literature and walk out at any time provides a more comfortable experience, Wahlfeldt explains.

Dental offices too tend to do well in malls. “They recognized a long time ago that they needed to be more visible,” says Wahlfeldt. A Gallup poll shows that, in 2013, one-third of Americans did not go to the dentist. Besides the cost and general dental anxiety, many people don’t visit the dentist because they simply forget to do so. “If you see the office, you are more apt to come in and get regular dental care,” says Wahlfeldt.

Healthcare facilities that offer preventive care are good potential mall tenants as well. Screening centers for colon cancer, breast cancer, diabetes, and osteoporosis are examples. “People are interested in preventive care and are more apt to go to a healthcare clinic if it’s convenient, easy, and familiar,” says Wahlfeldt.

A different mix for modern times

Malls reached their heyday in the 1980s when 56 different department stores called the mall their home. Today, only about 12 department stores remain. Other mall perennials—boutique shops and small retail stores—are not the steadiest of tenants, either, with an 80 percent failure rate for new stores and with old staples such as Wet Seal, Aeropostale, RadioShack, and Delia’s closing all or a large number of stores.

“The big attraction of healthcare providers for malls is financial stability,” says Wahlfeldt. Vanderbilt Health in Nashville, Tennessee, is one such financial success story. This healthcare facility, after signing a 12-year lease, transformed an ailing mall into a thriving one with new retail tenants that happily share space with this healthcare giant.

Foot traffic is another benefit. “If you’re a big retail mall, and you’ve got a lot of empty spaces, you’ve got to sell them. Co-tenants would rather see a space filled and operating than sitting there vacant,” says Wahlfeldt.

Challenges with malls

Healthcare providers, however, come with their own challenges for malls. “Our healthcare clients tell us they want easy parking, lots of visibility, and to be as convenient as possible for repeat visitors,” says Wahlfeldt.

This is where a large mall might not be as good an option as, say, a strip mall would. “It might be difficult to find parking close to a health center located in a mall,” says Wahlfeldt. And first-time patients might have a difficult time even finding the facility in a large mall.

While around one-third of American 7,200 urgent-care centers – places where patients go when their regular doctor is not available – are already in malls, according to Urgent Care Association of America, emergency care is a different matter. “No ambulances can come to the center because retailers do not want that disruption,” says Wahlfeldt.

Meanwhile, healthcare facilities might be restricted from selling medications if there is already a big drugstore in the mall, not to mention reluctance among retailers to have what they assume are “sick people” walking through the mall. “If other tenants complain about health risks, there could be some pushback,” says Wahlfeldt.

And finally, the costs might prove to be too much for healthcare providers that need a particular setup to operate, such as special plumbing or X-ray equipment with high power requirements. “That infrastructure investment is expensive. Add that to the mall rents, and it can be very challenging for a healthcare provider to make it work.”

That’s not stopping a growing number of healthcare providers to consider the move. “There’s a lot of change right now in the healthcare industry, and everybody is looking for their next wave of attack for their business strategies,” says Walhfeldt. “I see more and more reasons why healthcare providers want to be in retail centers. But right now, there are more reasons why the malls are still a bit challenging.”