10D — January 2023 Forecast — M id A tlantic Real Estate Journal
www.marej.com
2023 F orecast By Jim Tancredi and Tyler Foresta of LMT Commercial Realty, LLC The Emergence of The Medical Use Tenant in retail centers
A
s the effects of the pandemic continue to wane, we are observ -
local demographics such as the significant increase in Delaware’s population since
landlords are selecting users that best serve the needs of the residents living close by their centers. One genre of the retail market that is noticeably more present than ever, is the medi - cal service provider segment. A push towards the placement of medical-related tenants in local community centers is having a substantial effect on tenant mix and positioning of those tenants, in many retail projects. The slowdown in tradi - tional retail sales like soft goods, hardware, house - wares, etc., triggered by COVID-19 shutdowns, led
to a significant decline in demand for traditional com - munity center retailers. Decreased demand resulted in more retail center vacan - cies, as well as an increase in surviving tenant requests for substantial rent reduc - tions to adjust for their re - duced sales. The increased vacancy and requests for traditional tenant rent con - cessions, opened the door for an emerging trend in retail: The Medical Use Retail Ten - ant. Medical practitioners are seeing the influx of new prospective patients with
the migration of population out of regional city centers as the population shifts to - wards more suburban living. In Delaware, this population shift is primarily the result of larger city residents trad - ing expensive city-life for a less expensive suburban life - style in smaller, less densely populated areas. Residents of these nearby cities, and even the densely populated suburbs surrounding them, are escaping to Delaware by the thousands to take advan - tage of a litany of favorable items such as lower taxes, more affordable real estate, and far less congestion when compared to the cities they are leaving behind. Retail centers are now viewed by medical practitio - ners as viable alternative to medical complexes with easy access, parking, and good high visibility advertising. We are seeing everything from physical therapy, dentists, chiropractors, imaging cen - ters, and renal care, to even more intensive primary care doctors, urgent care services, and even surgicenters that provide convenient outpatient surgical options for patients in communities that are near these retail centers. In summary, these changes benefit landlords in three differ - ent ways: First and most obvi - ous, they decrease their vacancy rates. Second, they are assist - ing the market in meeting the demand for convenient medical services in their communities. Lastly, medical related tenants typically afford higher rental rates compared to standard retail tenants. The higher rental rates paid by these users corresponds to the fact that there will always be a need for medical services, and most medical practitioners take health insurance for pay - ment, meaning the practitioners can typically rely on a steady stream of annual revenue re - gardless of economic conditions. Plain and simple, medical related tenants offer a landlord more sta - bility compared to that of many traditional retail tenants. Jim Tancredi is a Principal at LMT, and Tyler Foresta played a key role in the launch of LMT and works primarily with sales and leasing. LMT Commercial serves real estate investors, property owners, tenants and restaurant own - ers and operators throughout the Mid-Atlantic. MAREJ
ing trends in leasing that will impact the retail sector in 2023. Many restaurants and retail - ers, includ - ing service
the onset of the pandem - ic, are mean - ingfully im - pacting the demand for retail, hos - pitality, and entertain- ment sectors
Jim Tancredi
Tyler Foresta
providers, are modifying their business models to navigate the new challenges precipi - tated by the pandemic. Ad - ditionally, recent shifts in
in this market. These changes in market conditions are forcing landlords to reconsider their leasing strategies. In many cases the
IMITLESS.
RUSTED. OTIVATED. LMT Commercial Realty, LLC professional services include: n Investment Sales n Industrial, Commercial and Residential Leasing n Assisting with 1031 Exchanges n Retail and Restaurants n Land Sales and Development n Life Sciences, Multifamily, Office and More n Property Management n Real Estate/Development Consulting
We service Delaware, Pennsylvania, Maryland and around the globe. For more information on our services please contact us at 302-414-1000 or go to LMTCRE.COM.
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