Medtail: The Future of Retail Real Estate in Healthcare

Medical space is taking a front seat in the retail real estate industry, with around 20% of current leased medical spaces located in retail environments. This trend is poised to grow further over the next decade, transforming shopping centers nationwide.

This shift towards "Medtail" (medical retail) is great news for landlords, as Medtail tenants historically remain resilient during economic ups and downs. They not only boost portfolios but also enhance cross-shopping activity, providing a win-win situation for all stakeholders.

Medtail tenants are injecting fresh demand into retail spaces, making shopping destinations more than just places to shop. They offer valuable and unique healthcare experiences, making health prioritization convenient for consumers.

Many retail property owners are capitalizing on this Medtail wave, with senior vice president of leasing at Phillips Edison & Co., Ron Meyers, describing it as one of the hottest categories in their portfolio. The appeal lies in the longer leases, frequent customer visits, resistance to e-commerce, and once secured, Medtail tenants tend to stay put.

Gone are the days when medical spaces were used merely to fill hard-to-lease locations at reduced rents. Nowadays, landlords actively seek medical tenants for their properties, often giving them prime spots in neighborhood and community centers. The emphasis is not just on healthcare services but on promoting health and wellness, much like grocery stores and drugstores in the retail mix.

Medical service providers are keeping an eye on their competitors setting up shop in shopping centers and are increasingly seeking out space in this retail context. Post-pandemic, demand from healthcare providers has surged.

The U.S. spends a staggering $4.4 trillion annually on healthcare, with forecasts suggesting a 5.4% annual growth rate through 2031. This perfect storm of factors is set to keep the demand for healthcare and healthcare real estate robust.

As consumers increasingly expect convenience beyond home deliveries, healthcare services are moving into retail spaces that were once occupied by traditional retailers. The aging Baby Boomer population and a growing focus on health have driven the expansion of services like urgent care and dermatology. This new retail sector, known as "Medtail," is a creative way for landlords to fill vacancies and attract foot traffic.

In this evolving landscape, Medtail businesses seek locations tailored to their target customers. Grocery stores have proven advantageous in attracting these tenants, and certain Medtail providers prefer end-cap locations for greater visibility. Others, like dental, eyecare, and physical therapy, don't require premium spaces, making them ideal inline tenants near grocery stores.

In a world where convenience is paramount, delivering healthcare and personal care services from retail locations marks the next step in the retail evolution. Medtail is changing the game in retail real estate, creating exciting opportunities for landlords and a convenient, customer-focused approach to healthcare.