The glass partitions may stay up in stores at cash registers long after the pandemic leaves, as retailers aim to offer a variety of measures to make customers feel safe again, experts say.
Other such changes range from subtle — such as touchless doors and sink handles — to not-so-subtle, such as bringing some retail items behind a counter instead of open for everyone to touch. The ideas being bandied about show just how quickly the novel coronavirus has changed retail businesses, much of which had to shutter or reduce service due to stay-at-home orders.
These shutdowns have impacted revenue drastically, with some retailers on the brink of permanently closing their doors.Nationwide, about 630,000 stores have closed due to COVID-19, and $430 billion in revenue may disappear in the next three months, according to theFinancial Times.
Businesses will have to adapt in order to survive and bring customers back, experts say. But these changes can’t move too quickly or be implemented in a way that would make it more cumbersome for customers. Still, many companies are going back to the drawing board right now with these new ideas, said Erin Simpson, business development and marketing for Orlando-based architecture firm Scott + Cormia Architecture + Interiors.
“Our culture already has bought into it — design just needs to catch up,” added Jose Lugo, vice president at Miami-based architecture firm Bermello Ajamil & Partners Inc.
Restaurants may see some noticeable changes. Tables and bar stools could be spaced out more. And cameras may beam back live video of the kitchen to monitors in a seating area for customers to see how their food is being prepared, said Cindy Schooler, senior vice president and market leader for Dallas-based SRS Real Estate Partners.
On the soft goods side, e-commerce will continue to disrupt retail delivery. But it remains to be seen if these retailers will want things returned, like clothes, if they feel they’ve been contaminated.
“The things I hear on calls now, I say, ‘Wow I never thought of that,'” Schooler said.
That said, no one knows how much brick-and-mortar retail will change. And — while some common sense measures may stick around — people may want to be closer to strangers again once they feel safe, said Drew Forness, president of Winter Park, Fla.-based Forness Properties.
“We’re all going to get back to some sort of normalcy,” he said.
While mom-and-pop retailers may be feeling the economic pain of coronavirus the hardest, some bigger companies have decided to forgo rent payments as well. But landlords aren’t buying it.
Owners of malls and shopping centers have been putting together a “blacklist” of financially stable tenants that haven’t met their April rent obligations, the Wall Street Journal reported.
“We think that it’s their duty to pay April rent,” chief executive officer of Kimco Realty CEO Conor Flynn told the Journal. “The customer base is going to recognize who the bad actors are.”
According to Marcus & Millichap, April rent collection has ranged from just 10 to 25 percent for mall owners with higher concentrations of nonessential tenants, to 50 to 60 percent for landlords with “essential” tenants such as grocery stores and pharmacies.
Large retail tenants that have failed to pay rent in full include Burlington Stores, Petco Animal Supplies, LVMH Moët Hennessy Louis Vuitton, Victoria’s Secret and Staples.
Staples, which has been able to keep many stores open in areas where it is considered essential, has told landlords that it will not pay rent because of a drop in sales. Dick’s will not pay rent at stores that were closed due to government orders, but will continue to pay rent for stores that it closed voluntarily.
While some mall owners have indicated that they plan to declare non-paying tenants in default, smaller landlords may be more hesitant to confront big tenants over rent payments. Retailers appear to recognize that they have the upper hand, but things could get messy.
“The retailers think they have leverage here and they’re trying to use it,” Green Street Advisors analyst Vince Tibone said. “I see it potentially becoming a fight and going into litigation.”
Life moves on in South Florida’s commercial real estate market, regardless of rain, shine or the coronavirus.
Avra Jain, the chief executive officer of the MiMo-based adaptive reuse consultancy firm Vagabond Group, and Scott Sherman, co-founder of the Brickell-based commercial property management firm Tricera Capital, see a steady market.
Jain and Sherman said in a Bisnow webinar on Thursday that new leases continue to be signed and construction is moving forward despite the coronavirus pandemic.
“The city of Miami has been functional in reviewing sites,” Jain said. “The city being functional says a lot about the city’s ability to move forward in a crisis.”
New adaptive use, boutique projects are moving forward, Jain said.
“I’m getting ready to sign another lease. Tenants are looking six-to-nine months out.”
Vagabond will move forward with a new adaptive use project soon, Jain said, with an added benefit of sliced prices for materials. Prices decreased for several construction materials, including copper and oil, she said. She expects to save about 10% on construction costs for her new project.
Vagabond completed two projects on time in recent days, she said. City officials reviewing job sites made changes to ensure safety and precaution, she said, including banning portable toilets and requiring the firm to allow construction workers to use the bathroom in the building, provide masks and hand sanitizer.
“I don’t see the construction industry being shut down,” Sherman said. “DeSantis and Trump have it in their interest to keep it going.”
The $2.2 trillion relief package (CARES ACT) is an opportunity for commercial real estate brokers and consultants to connect clients with banks and other lending sources participating in the program that earmarks $350 billion to assist small business.
“This is a great opportunity for commercial real estate brokers and consultants who may have been sidelined during the coronavirus outbreak to be a valuable resource for their clients,” said Gabe Beukinga, the newly named president of Radius Bank’s guaranteed government loan division which will be facilitating the loan process for Radius.
Among the key elements of the paycheck protection program that people should be aware of, according to Beukinga, are eligible businesses which include those with 500 employees or fewer. Some covered industries may have different thresholds based on Small Business Administration (SBA) guidelines. Not for profit entities may also eligible for the program.
The maximum loan amount is the lesser of $10 million or 250 percent of the average total monthly payments for payroll and benefits costs. Eligible uses for the funds include: payroll costs, costs for health care benefits, employee salaries, commissions, mortgage payments, rent, utilities and interest on any other debt.
The loan will be deferred for 6 to 12 months and is non-recourse. Any portion of the loan not forgiven will be up to a 10-year amortization at 4 percent.
According to Beukinga, small businesses are the backbone of the American economy and are in desperate need of this payroll protection plan.
“The small business portion of the relief effort has those companies in mind—businesses that may occupy 50 to 75,000 square feet of industrial space, or less than 10,000 square feet of office space,” he said. “This relief effort is a significant and necessary step in supporting the daily operational needs of small businesses in every community across the country that have been devastated by the impact of coronavirus.”
Those involved in SBA lending programs are preparing for an onslaught of calls and questions about the relief program, because of the magnitude of impact the coronavirus has had on the economy overall. Beukinga said the most important thing for lenders is to be adequately prepared for unprecedented activity as small businesses look to put relief funds to work as quickly as possible.
“Radius Bank has expanded our staffing in anticipation of this program and the important work that is to be done for businesses across the country,” Beukinga said. “We are poised and ready to help small businesses, and the men and women behind them, during this challenging time.”
Radius Bank provides a full complement of accounts and services to meet the needs of consumers and businesses nationwide. The digital bank has assets of approximately $1.4 billion and its online banking platform helps to further expedite the loan process, a distinct advantage to help expedite activity under the relief program.
Measures to contain the spread of coronavirus are still shifting by the day — and so are responses by investors, developers, builders, banks and buyers. To track the impact in real-time, RE|source Miami is asking area real estate professionals in various sectors for on-the-ground reports.
Today we hear from Michael Comras, president & CEO of the Miami-based Comras Company, which specializes in the development, leasing and sale of urban and suburban retail properties across South Florida.
As a principal in various development entities, Michael has also been involved in shaping retail in high-profile destinations including Coconut Grove, Miami Beach’s Lincoln Road, Design District, Wynwood, and Downtown Miami.
Q: How is the South Florida retail sector coping with the unfolding coronavirus crisis, and the economic slowdown we are experiencing?
In the short term, the market has been significantly impacted due to the government mandates requiring that all restaurants and non-essential retailers close their doors to curb the spread of COVID-19.
As a community, we need to acknowledge the challenging times ahead and recognize that by working collectively we will get through the pain and ensure that the retail and restaurant community lands on its feet. Now more than ever, tenants and landlords need to work in unison toward a common goal: sustaining business and our retail and restaurant economy.
Everything that existed prior to the coronavirus pandemic will exist again, but there is no silver bullet to solve the economic slowdown. The building blocks to recovery will depend on solid relationships and positive collaboration amongst all stakeholders.
Landlords do not want widespread vacancies and tenants want venues where they can grow their business and thrive. Fusing these objectives into a cohesive goal will allow the retail sector to reemerge stronger, faster. In addition, banks and lenders need to work closely with developers and property owners to make sure liquidity continues to flow. State and Federal financial relief will also provide necessary support.
What is the state of construction in Miami-Dade? Are real estate projects still getting built, and have timelines been delayed due to the virus?
The good news is that most construction projects in Miami are making headway and moving forward as planned, to the extent that the work can be completed in a safe manner. Construction firms are following strict guidelines to ensure social distancing inside job sites.
We expect to see delays in lease negotiations and leases that have not been executed. The permitting and approval process required for tenant interior buildouts will also take longer, and projects currently undergoing inspections may lag as there are new restrictions that will limit on-site inspections. In addition, the plan approval process will be extended by cities prohibiting the “walk-through” of plans. A process that provides for a quicker review of buildout plans.
Many retail tenants have shut their businesses. How are you counseling regarding landlords and rent concessions?
Communication is key. There is no one-size-fits-all strategy to resolve these issues. Every landlord has a unique relationship with their tenants and the parties must openly communicate to arrive at a sustainable solution that can work for both sides.
Local retailers and restaurateurs are integral to the fabric of our community and, unfortunately, they are the ones being most affected. In the spirit of working through a difficult time, all sides must be honest and transparent. Often, landlords are not privy to tenant sales figures, which is the main indicator of how a business has been performing. It will be important for tenants and landlords to look at the sales trends prior to the crisis to strategize towards a successful resolution.
Access to information can help guide landlords when evaluating potential rent concessions for their tenants. Solutions may include rent abatement, deferrals or other payment structures that allow both the tenant and landlord to navigate this hardship and remain open for business.
Do you anticipate that this outbreak will have a long-term, lasting impact on the way real estate projects are planned and designed?
Prior to COVID-19, retail was already going through a major transition, becoming more experiential and interactive. This will only become further pronounced as we emerge from this pandemic. At the same time, people are becoming even more accustomed to ordering goods online – since they have no other option at this time – and this could have a ripple effect on select brick-and-mortar businesses. Retailers will need to continue to improve their business’s online capabilities.
Miami is a unique “city of villages”, a series of walkable destinations such as The Miami Design District, Wynwood, Miami Beach, Brickell, Coconut Grove, Downtown Miami and South Miami. Connectivity, walkability, and revitalization will continue to fuel our local real estate economy. As human beings, we are social creatures who thrive on congregating and being a part of something greater than ourselves. Experiential retail will perfectly align with the pent-up demand people will have to enjoy experiences from dining and shopping to family entertainment once these stay-at-home measures are lifted.
There is no city as resilient as Miami. We’ve endured natural disasters with devastating hurricanes, deadly diseases with Zika and H1N1, and now the novel coronavirus – but with each setback we’ve come back stronger and have continued to thrive. This is a serious crisis that we will overcome. By supporting one another and working together, we will once again come out on top.
As Americans flock to grocery stores during the coronavirus crisis to stock up on essentials, foot traffic at grocery stores has soared. Placer.ai, a platform that tracks retail activity, found year-over-year traffic spiked by 40 percent at Albertsons stores and by 36 percent at Kroger stores on March 13 through 15.
At the same time, stock prices of publicly-traded owners of grocery-anchored shopping centers have cratered. For instance, the stock of New York City-based retail REIT Brixmor Property Group Inc. tumbled from a 2010 peak of $21.33 on Feb. 20 to $12.40 on March 17. That’s a decline of 41.9 percent.
Jericho, N.Y.-based retail REIT Kimco Realty Corp. saw a similar drop—its stock plummeted from a 2020 high of $20.45 on Jan. 23 to $10.86 on March 17. That works out to a decrease of 46.9 percent.
Brixmor and Kimco aren’t the only retail REITs being punished by the stock market. As of March 17, year-to-date total returns had plunged 42.7 percent for all retail REITs, according to the Nareit trade group. Regional mall REITs have been hit hardest, with a 56.4 percent fall in year-to-date total returns. The dive in total returns was 38.9 percent for shopping center REITs and 33.3 percent for those with free-standing stores.
A boost for grocery-anchored retail?
Despite tanking stock prices, America’s dependence on grocery stores could provide a long-term lift to Brixmor, Kimco and similar REITs.
In the short term, though, grocery chains could experience a temporary dip in foot traffic as people stay close to home, Placer.ai researchers note.
“That being said, this [recent] momentum could play a role in making this uncertain time easier to get through, giving grocery chains a bit of a boost before a more difficult period,” according to Placer.ai. “The strongest players will find ways to conduct business and continue building on customer loyalty, with timely restocking and home delivery options.”
This scenario should, in turn, help REITs with large portfolios of grocery-anchored shopping centers survive over the long haul—particularly compared with malls and other retail properties that lack necessity retail componenets.
Aside from Brixmor and Kimco, other publicly-traded REITs with a substantial amount of grocery-anchored shopping centers include:
San Diego-based American Assets Trust Inc.
Cincinnati-based Phillips Edison & Co. Inc.
San Diego-based Retail Opportunity Investments Corp.
Beachwood, Ohio-based Site Centers Corp.
Greenwich, Conn.-based Urstadt Biddle Properties Inc.
Houston-based Weingarten Realty Investors.
Still open for business
Among publicly-traded REITs that own grocery-anchored centers, lower-levered REITs will likely “outperform,” notes Evan Hudson, a partner at New York City-based Stroock & Stroock & Lavan LLP whose specialties include REITs. Furthermore, Hudson anticipates those that can tap into lower-interest borrowing will try to expand their portfolios.
However, not every tenant at a grocery-anchored shopping center will thrive during the coronavirus pandemic.
“Even if people are dissuaded from shopping for non-essential goods or going to the movies, the grocery stores and pharmacies are open for business,” Hudson says. “Of course, grocery-anchored real estate companies generally aren’t pure plays—the non-grocery components of the centers will see flagging performance…”
‘Reliable cash cow’
If—as many economist predict—the U.S. enters a recession, grocery-anchored retail centers will be more recession-proof than, say, strip retail centers, says Alan Cafiero, director of the national retail group and net leased properties group at commercial real estate services company Marcus & Millichap. Grocery stores “will survive and perhaps even thrive in a time like this,” he says.
“This type of pandemic tells us that it’s essential human needs that underscore the importance of a grocery tenant in a shopping center,” Cafiero says. “If you know that your anchor is functioning on all cylinders, you know that the majority of your income in that shopping center is secure. This is why the grocery-anchored centers are the most desirable retail in the market.”
The weakening of bricks-and-mortar retail makes every center vulnerable to economic slumps, notes Jerry Reichelscheimer, chairman of the retail leasing and development practice at Miami-based law firm Akerman LLP. But for owners of shopping centers, grocers are a “reliable cash cow,” he says.
“Although a grocery store might not be as attractive as an Apple store or otherwise produce the same high rental stream as some of the more flashy retail tenants, it is a steady revenue source,” Reichelscheimer says.
Strings attached
But that cash cow comes with a caveat. Reichelscheimer says any landlord of a retail center must explore the viability of a grocer before leasing space to it. For example, a grocery store should be able to adapt to shoppers’ demands for amenities like home delivery and order pickup, he says.
“The grocery chain needs to be very flexible, able to move and change quickly, and have the economic background to withstand disruptions to their stores,” Reichelscheimer notes. “A weak grocery store chain that doesn’t have vision is just as vulnerable as other retailers.”
The coronavirus pandemic promises to reshape our long-term shopping behavior, including how we buy groceries, as homebound Americans depend more heavily on e-commerce and grow accustomed to it, adds Patrick Healey, founder and president of Caliber Financial Partners LLC, a financial advisory firm in Jersey City, N.J. As a result, grocery chains and other retailers will need to undertake competitive tune-ups.
The future of online grocery shopping
Still, many people don’t feel comfortable buying groceries online, as they want to see and touch fruits, vegetables and other goods, Healey notes. A Gallup Poll taken in July 2019 showed that 81 percent of Americans had never ordered groceries online.
“Sectors that are able to capitalize on the switch to e-commerce and deliver that way will do better than others, but there’s no doubt retail is one of the areas that will suffer significantly,” Healey says.
The current “grand experiment” of staying indoors to avoid coronavirus exposure could spur a long-term shift in the way we shop for groceries, according to Scott Crowe, chief investment officer at Plymouth Meeting, Pa.-based CenterSquare Investment Management LLC. This could harm retail REITs and other owners of grocery-anchored shopping centers, although Crowe says it remains to be seen whether coronavirus-imposed changes in consumer patterns will stick.
In a March 13 survey by New York City-based Gordon Haskett Research Advisors LLC, one-third of shoppers said they’d purchased groceries online during past week, according to Bloomberg. Of those consumers, 41 percent were buying groceries online for the first time.
“Consumers have been slow to adopt e-commerce as a way to shop for groceries, but consumers today, in an effort to quarantine as much as possible, have shown significant adoption of online grocery shopping,” Crowe says.
Millennials brought on a cultural shift built around valuing experiences over material things. This trend resulted in another movement—away from suburban sprawl and toward live-work-play and mixed-use environments.
Commercial Property Executive asked Scott Sherman and Ben Mandell, co-founders of Miami-based real estate investment firm Tricera Capital, how they choose the right neighborhoods for bringing more experiences and character to a city. Approximately one year ago, the firm acquired the Palm Beach Post building, a former printing press and newspaper headquarters located in West Palm Beach, Fla., with the intention to transform it into a mixed-use building encompassing retail and office space. The project is scheduled for completion in the first quarter of 2021.
The duo also talked about the way adaptive reuse and redevelopment projects can enhance and preserve the essence of a community by creating relevant retail experiences while honoring the history of a building.
The retail segment has been constantly changing for the past few years. How would you describe the sector today?
Sherman: It depends on the type of retail. Retail is definitely evolving, but not all retail is dying as you read in the media. Our focus on emerging and mature growth markets with a dense urban core has been proving out. Service and entertainment-focused retail is doing well, and larger national brands that have been quick to adapt, downsize and change merchandising and product offerings have also been performing well.
What kind of retail assets and tenants are you targeting in this late-cycle environment?
Mandell: We are focused on neighborhoods and cities in the Southeast U.S. with a strong population and job growth. Over the past decade, the national trend has shifted from suburban sprawl to live-work-play and mixed-use environments. With e-commerce thriving, we are focusing on retail uses that can’t be replaced online. Food and beverage and entertainment-type uses are thriving right now, but you need to balance that with a mix of other uses such as fitness, service and some dry goods as well.
Retail today is mostly about experiences. How do you make sure that your properties remain relevant for tenants and customers alike?
Sherman: I like to say we are in the business of betting on operators and concepts. We come across a lot of new operators and concepts and need to determine which ones we believe will be successful within our project, and which operators have the experience and ability to execute. When we find great operators in a market, we like to try and work with them to create new concepts that we believe will be synergetic with our tenants.
This is extremely important today, as the idea of “credit tenants” is not what it used to be. Most of these new experiential tenants are not AAA-credit, nor do they have significant balance sheets to put behind the lease.
What strategy do you use when choosing a new location for a retail investment?
Sherman: We take a more of a rifle than a shotgun approach when exploring a new market. We will first look for cities with an influx of residential and office density/job growth. If the job market is strong and the residential market is growing, we look to find the street, neighborhood or pocket that has the bones and character to be a vibrant and pedestrian-friendly retail area that we can start to assemble and merchandise.
We also understand that every city/market is unique, so we like to understand the demographics and type of residents living and moving there to better cater the retail mix to the residents. We also try to embrace the local tenants and operators and sprinkle in regional and national tenants where needed. Central Avenue in St. Petersburg, Fla., is a great example of a street and city that checked all the right boxes, and we have been successful in executing our strategy there.
Kushner Companies closed on a $17.55 million loan for its properties in Wynwood, records show.
Wynwood 2 Owner LLC, an affiliate of the New York-based real estate firm, secured the financing from CIT Bank for the properties at 108 and 127 Northwest 27th Street in Miami, where Wynwood 27 and Wynwood 28 are planned.
Kushner, led by Charles Kushner, Nicole Kushner Meyer and Laurent Morali, is partnering with the Miculitzki family’s Block Capital Group to develop the sites. They will have a total of 152 rental apartments, 50,000 square feet of office space, 34,000 square feet of retail space and parking.
In July, Kushner and Block Capital paid $32 million for a portion of their assemblage.
The partnership just paid $4.6 million for the two lots at 108 and 120 Northwest 27th Street. BM2 Realty brokered the latest deal, according to a press release.
Last month, the Miami Urban Development Review Board approved plans for Wynwood 28 to have nearly 15,800 square feet of commercial/retail space, 44,637 square feet of office space, 40 residential units, 232 parking spaces and 19 bicycle spots.
In all, Kushner Companies has rolled out plans to build three major apartment projects in South Florida that will bring a total of 3,000 units at a cost topping $1 billion. In addition to the Wynwood properties, the firm has an assemblage under contract in Miami’s Edgewater neighborhood in an Opportunity Zone, a development that’s expected to cost over $500 million and deliver more than 1,000 units in three phases.
The company also announced last year that it was under contract to purchase three properties for $49 million across the street from the Virgin Trains station in downtown Fort Lauderdale’s Himmarshee District.
Retail in South Florida is defying the harsh reality facing the rest of the country.
Even with delivery of approximately 178K SF of new retail product in Q4 2019, vacancy rates remained at 4.5% in Miami-Dade County, same as the prior quarter, according to Colliers International research. Net absorption for the year was over 671K SF.
Dave Preston, Colliers executive managing director of retail services, marveled at the continuing strength of the sector. The average asking rent per SF was $38.18, up from $34.81 the year prior.
“Something at some point is going to have to give, but right now we’re still seeing upward trajectory,” he said.
Notable big-box leases included a 37K SF 24-Hour Fitness in the airport submarket, a 34K SF Ross Dress for Less in Downtown Miami and a 30K SF Pinstripes at The Plaza Coral Gables. Ross alone added 98 stores nationwide last year.
“Discount stores like Target, Marshalls and Ross Dress for Less continue to be thriving in today’s market and absorbing vacated box space,” Colliers officials wrote in the report. “Their business models have protected them from the threat of e-commerce, as well as their convenient location in busy grocery-anchored plazas.”
Colliers pointed out the strength of entertainment retail concepts, evidenced by the growth of Pinstripes, and also noted the record sale of The Shops at Merrick Park in Coral Gables — part of Brookfield’s acquisition of four top-tier malls across the country. Brookfield intends to redevelop surrounding land with complementary uses such as hotel, office and residential.
“I would say that, as usual, South Florida is doing a pretty good job bucking some national trends,” Preston said. Miami’s density, tourist dollars and foreign money make it so that “our market is a different animal in a lot of ways.”
“Your Ross or Marshalls in South Florida, a 20K or 30K SF space, will do anywhere between $6M to $15M-$20M in sales,” Preston said, adding that even though customers can now get nearly any product delivered to their door, “nobody wants to sit in the house day and night. People want get out of their houses for something.”
Stores like Marshalls, TJ Maxx and Yoyoso (a Chinese retailer that recently leased a prime 41K SF space on Lincoln Road) give shoppers a reason to return frequently because they offer high turnover of product.
“People want to be a little bit surprised,” he said. If and when the economy contracts, Preston said, weaker players may fall out, but he expects health and fitness to remain strong.
“If the sales are there, they’re opening more stores,” Preston said.
While many areas of bricks-and-mortar retailing face headwinds, one shows signs of growth and promise: health care and medical services offered within stores and shopping centers. These services extend beyond the pharmacies and optical shops that have long had a presence within many retail outlets, and now include checkups, vaccinations and management of chronic conditions like high cholesterol.
Two large drug store chains are among those at the front of this trend. Working with health care provider partners, Walgreens operates more than 230 retail clinics run by nurse practitioners. On top of that, since 2018 the Chicago-based retailer has introduced primary care centers staffed by physicians in about a dozen stores.
In 2006, CVS acquired MinuteClinic and now operates 1,100 MinuteClinic locations in 33 states and Washington, D.C. The clinics offer vaccinations and help with minor illnesses and diabetes monitoring, among other services.
Drug store chains aren’t the only companies mixing retailing and health care. In late 2019, the Mall of America in Bloomington, Minn., opened a walk-in clinic in partnership with M Health Fairview, itself a partnership between health care provider Fairview and the University of Minnesota. The 2,300-square-foot clinic offers five exam rooms and services including laboratory and radiology.
Now open in two Georgia locations, Walmart Health offers primary care services.
Walmart Health, now open in two Georgia locations, offers primary care. The company plans to expand to other communities and is opening a handful of additional sites in 2020, says Walmart spokeswoman Marilee McInnis.
Driving factors
Several considerations are behind the desire to bring health care to retail locations. “Patients can benefit from more convenient access to high quality care,” says Jim OConor, Walgreens’ senior vice president of U.S. health care strategy and development. Many retailers and shopping centers are positioned to address this need; about 78 percent of Americans live within five miles of a Walgreens store, OConor says.
What’s more, many malls have excess space, says Wendy Liebmann, CEO of consulting firm WSL Strategic Retail. Retailers and shopping centers can attract and retain customers, who like the convenience of handling both their health care and shopping needs in one trip. For 100 Oaks Mall in Nashville, Tenn., bringing health care into its retail mix was key to its survival: The mall was struggling when Vanderbilt Health took over about half its 850,000 square feet, now used for both clinic and office space.
Using retail locations to provide health care also might help drive down costs. While Liebmann isn’t an expert on the cost of health care, she talks with many people who are. “They see community-based health care as one way health care costs can be contained,” she says.
Americans’ interest in health and wellness is another motivator. This includes both preventative care as well as the need to manage chronic conditions, many of which become more prevalent with an aging population. “This huge focus is one of the biggest consumer spending opportunities in decades,” Liebmann says. “It’s the ‘big business of well.’”
At the same time, many hospital systems are in “growth mode,” says Todd Caruso, senior managing director with a focus on retail at commercial real estate firm CBRE Group. Moreover, executives with many systems recognize the opportunities available in outpatient care, much of which can be handled in a retail setting.
Some newer doctors and dentists, especially those graduating with mountains of debt, might decide a position at a retailer with a nice salary is more feasible than trying to buy out a practice when a doctor retires. “It’s not for everyone, but some may feel under the gun, and pressed financially, to start generating income,” Caruso says.
The models
Retailers are taking somewhat different approaches in the ways they provide health care services. Through its physician-led primary care centers, Walgreens combines its core pharmacy expertise with care provided by organizations like Partners in Primary Care, Village Medical and Southwest Medical Associates. The result is “a neighborhood health destination around a modern pharmacy that brings affordable health care services to customers,” OConor says.
Walgreens combines its core pharmacy expertise with care provided by organizations including Partners in Primary Care.
While it might seem that the expansion of services to primary care would overshadow the need for pharmacies, that’s not necessarily so. As OConor notes, many older individuals have chronic conditions, and pharmacists often play a significant role in these patients’ efforts to manage their conditions.
Walgreens’ pharmacists have “specialized knowledge and training to help manage chronic diseases, provide medication therapy management support, administer life-saving immunizations and provide education and counseling to assist patients with their health care needs,” he says.
In addition to its primary care centers, Walgreens offers clinics across the country through partnerships with local health systems. These are run by nurse practitioners and provide acute care. By partnering with local health systems, patients are able to receive care at their local Walgreens while seeing a provider that may be within their larger health system network, OConor says, and with whom they have an existing relationship.
Walgreens also offers weight loss management and diagnostic lab testing, and select stores are trialing dental, optical and hearing services. In addition, UnitedHealthcare and Walgreens have opened a handful of UHC Medicare service centers, where Walgreens customers can learn more about Medicare plans, meet with service advocates to discuss their UnitedHealthcare benefits and enroll in plans.
For its foray into more extensive health care services, Walmart Care Clinic focuses on bringing accessibility, affordability and transparency to primary care. The clinic encompasses diagnosis and treatment of chronic and acute illnesses, as well as preventative services and additional screenings. Patients booking appointments receive estimates of the costs, and the website lists prices for common services. The transparency “is taking the guesswork and complexity out of getting care,” McInnis says.
Feedback from both medical providers and patients has been positive, she says. Clinicians say they appreciate the integrated care model and the ability to address the diverse health needs of the community, and patients like accessing health care conveniently and affordably.
Accessibility and quality underpin the approach to health care by M Health Fairview, says Jakup Tolar, dean of the University of Minnesota’s medical school. “Our general approach to health care is to meet patients where they are,” he says. “We seek to make it as easy as possible for patients to interface with their health care providers.”
The M Health clinic at the Mall of America offers physicals, vaccinations and other services, as well as help for travel-related issues.
The reception to the clinic has been positive, says Jill Renslow, senior vice president of business development with the Mall of America. It’s easily accessed by the approximately 13,000 employees working at the mall, as well as guests staying at the two hotels connected to the property. That’s in addition to customers shopping at the mall. To serve the diverse group, the clinic offers physicals, vaccinations and other services, as well as help for travel-related issues.
“We’re fully prepared to scale this,” Tolar says. “We’ll go to different malls and different places where people go. We’re making health care simpler without compromising care.”
Halifax Shopping Centre in Halifax, Nova Scotia, is home to a range of health service providers, including medical, dental and breast-screening clinics and opticians. “We are looking to be a destination for customers, from shopping to dining, as well as health and wellness,” says marketing director Stephanie Schnare. The mall, which is on a bus line, is connected to several office buildings and near six universities, which host more than 50,000 students, including a large percentage of international students. “They find it convenient to hop on the bus, come to the shopping center and visit the clinic and dentist,” Schnare says.
Challenges
While the move to combine health care and retail shows no sign of stopping, it’s also not without challenges. One is building trust. “How do you show people they can trust you to deliver quality services?” Liebmann says. The idea of a “doc in a box” providing care from a retail location has rarely inspired confidence in potential patients. Similarly, some health care providers may balk at providing care in a non-traditional setting.
Another key is ensuring the quality and transparency of the services. At times, it’s hard to tell if some store-based clinics are staffed or even open, Caruso says. Who is providing care — that is, an MD or another medical professional — also can be unclear. “That fosters some skepticism,” he says.
Incorporating health care services within a retail setting often changes the business model. It could require an investment in space and medical equipment, as well as a trained medical staff. The product mix in the store could change, with more space devoted to medicines and equipment like walkers. “That conversion is important and not inexpensive,” Liebmann says.
And, as always, location is key. “The easier to access, the better,” Tolar says. The M Health Clinic is near an entrance to the Mall of America, where it has reserved parking.
Clear wayfinding also is critical, especially for medical services provided within shopping centers. Patients entering a mall may be nervous and focused on their upcoming visit; a confusing trek to get to a medical provider only adds to their anxiety. To alleviate this, Schnare says Halifax Shopping Center recently launched a text concierge service to help with wayfinding.
While the challenges are real, the promise of offering health care in a retail setting is as well. Changing demographics — most notably, an aging society with a generally increasing need for health care — along with growing interest in health and wellness will drive continued interest in the mix of retail and health care. “I don’t think we’re in the ninth inning,” Caruso says.
Similarly, consumers have grown increasingly used to the idea that the products and services they need be as convenient to access as possible. Adding health care to a retail mix is one way to accommodate this.
