Property Owners Turn To Unlikely Tenants In Bid To Lease Out Mall Space
Property Owners Pivot Amid Rise of Online Shopping
Property owners across the country are facing an ongoing problem. Department stores are increasingly closing, leaving large amounts of space vacant in shopping malls. The general rise of online shopping and its accelerated growth amid the pandemic only serve to exacerbate the issue.
It’s not atypical for doctor’s offices and urgent-care facilities to rent out space inside malls. What is new, according to industry observers, is that property owners are now leasing out entire sections of malls to medical tenants including hospitals. Analysts say it’s vital mall owners sign up tenants that operate outside of the online shopping paradigm—in this case, medical centers.
Malls Hit the Spot For Medical
Mall owners are also finding success leasing out to schools and converting vacant stores into warehouse space. Still, there are several reasons why this property class makes sense for hospitals and medical centers. Healthcare spending is on the rise—leading to industry-wide expansion—and malls offer convenient and plentiful parking, cheaper rents, and access to nearby customers.
The pandemic’s impact on hospital bottom lines is key here as well. Many medical centers have shut down elective surgeries, which are major sources of profit for hospitals. Setting up surgery clinics at malls means operations can take place away from contagious patients, keeping much-needed revenue flowing.
A Former Sears in Rochester Tells the Story
A recent and prominent example of the mall-turned-hospital phenomenon can be observed in upstate New York. For over 30 years, a Sears department store served as the anchor tenant at the Marketplace Mall in Rochester before closing in 2018. The initial plan was to break up the space and lease it to a company like Walmart, Target, Home Depot, or Lowe’s.
However, in early 2020, the property owner decided to rent the space to the University of Rochester Medical Center. Analysts say medical centers make for good tenants because they bring in foot traffic on weekdays when malls are typically quiet. In this case, URMC stakeholders explain they chose the mall because of its parking space, bus lanes, and accessibility to major roads. It’s looking like a match made in leasing broker heaven, bringing together an increasingly vacant property class and an expanding industry.
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