10B — September 27 - October 10, 2013 — Owners, Developers & Managers — Mid Atlantic Real Estate Journal


H ealth C are F acilities

he demand for newmed- ical facilities continues to be robust as the baby By Laura Lee Garrett, Hirschler Fleischer Retail and shopping centers ripe for health care and medical facility development T

work, home and personal ser- vices are in close proximity to each other. Health care provid- ers have responded by locating their services closer to where people live and by mixing with other non-medical uses versus the traditional medical office campus format. Shopping centers have be- come attractive venues for medical services due to their accessibility to residents and ample parking lots. Vacancies made available by the demise of many big box retailers during the recession have provided large, reasonably

priced space for many health care facilities. New urban de- velopment is trending toward mixed-use properties where medical office buildings and upscale stores co-exist. While retailers and health care users have many common needs, there are also some significant differences. As a result, landlords who want to attract both types of users to their developments need to be flexible in lease negotiations with medical services provid- ers, and cannot insist on a “landlord form” lease typically required for space tenants.

Permitted and exclusive uses, control of odors, and tenant’s right of first refusal are three areas where the health care tenant’s leasing requirements will vary from most retail tenants. Shopping center lease forms typically prohibit the use of premises in the center for of- fice or other non-retail uses. The health care provider will need a permitted use of medi- cal office and/or medical ex- aminations, tests, procedures, surgery and/or laboratory Permitted and Exclusive Uses

work. Medical offices can often include cafes or gift shops that will run afoul of other retail tenant’s exclusive use provi- sions for such establishments. Large scale discount stores and supermarkets often con- tain “minute clinics,” offering limited medical services. Both the retail tenant’s lease and the medical tenant’s leases will need to address the inter- play between these competing uses. Odors Restaurants sometimes emit strong cooking smells that may not bother shoppers but would be disturbing to pa- tients undergoing certain types of treatment. Landlords can address this in the site plan design and by requiring restaurant tenants to install and maintain ventilation and other equipment to relieve the surrounding premises of any odors. Odors from restaurant refuse will not be acceptable to health care co-tenants either, and landlords should include language in restaurant leases that requires tenant’s to exer- cise special care in handling garbage and to remove such materials from the shopping center as frequently as neces- sary in order to eliminate all odors. Rights of First Refusal Retail tenants usually ex- pand in a market by opening additional stores in other locations rather than expand- ing their premises within the same shopping center. With the exception of some anchor tenants such as supermar- kets, retailers rarely seek the right to lease additional space within the center. On the other hand, health care services providers often expand in their current loca- tion by adding complementary medical services and physician practices. They will desire a right of first refusal for lease space within the same devel- opment that becomes available to give them the opportunity to provide such additional ser- vices to patients. Rights of first refusal can be tricky and landlords need to be sure that the lease language is carefully drafted to specify the proce- dure for notice, and exercise of the right and the terms and conditions of such right. The shift of health care and medical facility development to shopping centers and other continued on page 16B

boomers age and the popu- lation grows. Over the last f ew year s , w e h a v e seen health care facili- ties moving to non-tradi- tional areas

Laura Lee Garrett

as land use patterns shift to meet the changing demands of the current consumer who wants to live in an area where

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