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Doctor, doctor

Healthy growth with medical sites


Franchise groups hope that locating near medical facilities will be a prescription for success.

Medical facilities have a well-deserved reputation for limited choices when it comes to food, beverages and gift items. But franchisees hope to change that image, and at the same time get in front of the steady stream of patients and staff who frequent hospitals, clinics and medical office buildings.

Traditionally, finding space within or near those health care buildings has been difficult to find. But a growing number of health care organizations and developers recognize the advantages in adding retail and restaurant space to the picture.

For example, Newport Beach, Calif.-based Accretive Realty Advisors Inc. is developing a $50 million medical and retail complex in Fullerton, Calif. The three-building complex features an 87,000-square-foot medical office building, a 23,000-square-foot residential condo building and an 8,000-square-foot building that will be devoted to restaurant tenants. All three buildings are connected to a parking structure by a breezeway.

The retail portion of the project had nearly 20 restaurant tenants lined up for four available spaces. “The demand has far outstripped what we had anticipated,” says Accretive CEO Thomas LeBeau. The restaurant building will house one 4,000-square-foot anchor and three smaller tenants that range in size from 1,200 to 1,400 square feet. The project is slated for completion in June 2007.

A high traffic count is one of many incentives attracting franchisees to explore real estate opportunities in and around medical-related facilities. A typical small business office might see four to five visitors each day, whereas a single physician may see 12 to 15 patients per day depending on the specialty, LeBeau notes.

Accretive’s new medical office building is expected to draw 1,000 to 1,500 patients per day. Add to that the physicians and staff—plus the fact that more than 3,000 employees are located about 200 yards away at St. Jude’s Medical Center—and the numbers are impressive, LeBeau adds.

Attractive incentives

Another reason retailers and restaurant businesses are eyeing such locations is due to a change in the type of patients visiting these facilities. In the past, most people went to the hospital when they were ill. Now the boom in outpatient care, elective surgeries and preventative health care creates a much “healthier” patient—one who is more likely to stop for a cup of coffee, snack or meal before or after a visit to the doctor.

As the health care arena becomes more competitive with patients increasingly “shopping” for quality, convenient care, organizations realize they need to compete for customers by creating a pleasant, convenient atmosphere, notes Garth Hogan, president and founder of Medical Realty Advisors in Laguna Beach, Calif.

As a result, medical-related facilities are looking to surround themselves with amenities that retail and restaurants provide. For example, one of the largest projects Hogan is currently working on is a 350,000-square-foot medical office complex in Irvine, Calif. that will include 15,000 square feet of retail space—primarily for food tenants.

Growing demand

Minneapolis-based Ryan Cos. US Inc. is leading a development team that is transforming a former Sears building in Minneapolis into a multi-use complex that combines medical office space, retail and housing—all within two blocks of a major hospital.

“I believe that hospitals and medical-related facilities are reaching out to retailers and restaurants,” says Rick Collins, vice president of development at Minneapolis-based Ryan Cos. “Rather than having in-house operations, they would rather have the brand-name retailer or restaurant.”

Allina Hospitals and Clinics will house 1,600 employees in about 411,000 square feet of office space within the development. The project also features a public market and business incubator called the Midtown Global Market, which will be located in 73,000 square feet.

“We have had demand from national retailers, but have turned them away, in support of the Midtown Global Market, which is made up of local vendors, predominantly entrepreneurial minority owners,” Collins says.

For franchisees, the challenge with medical developments is finding available space. The concept of locating restaurant and retail businesses in and around medical facilities is beginning to gain a foothold, but still is in its infancy. New developments that include retail components still represent a small percentage of all projects—perhaps 3 to 4 percent, Hogan notes.

“In the retail industry, there is a similar trend to add health care to shopping centers, whereas 10 years ago that would have been unheard of,” Hogan says. But as the trend to provide greater conveniences to customers through mixed-use developments gains steam, franchises may increasingly find locations in and around medical facilities as a “healthy” option for growth.

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