Archives for July 2023

You’ve probably noticed a shift happening around you. Retail spaces and healthcare services are becoming increasingly entwined, resulting in a new era of commercial real estate. This isn’t just a random occurrence—it’s a strategic move driven by the evolving needs of consumers. As our expectations evolve, so does the way we access healthcare, and this is having a big impact on the real estate needs of both sectors.

Retail healthcare trends really took off when the pandemic hit, and more and more healthcare providers are embracing retail real estate strategies. Pharmacies, grocery stores and pop-up clinics are becoming the norm for healthcare services. This shift is all about providing medical care in a more convenient and accessible way, mirroring the ethos of retail. Convenience is key in this new era, as consumers are looking for healthcare solutions that fit seamlessly into their busy lives.

Benefits and challenges of the retail healthcare market

By embracing a retail mindset, healthcare providers can expand their reach, offering services to underserved communities, while harnessing data analytics to better understand their customers’ needs and preferences. This customer-centric approach translates to more personalized experiences, propelling consumer retail healthcare forward and presenting more opportunities for healthcare organizations to grow.

Landlords are also starting to see the potential of these retail healthcare trends. Having healthcare tenants in their retail spaces not only provides tenant diversity, but also drives foot traffic, boosting visibility for other retailers. It’s a breath of fresh air for the retail sector, which has been grappling with the rise of e-commerce and pandemic-related challenges.

However, this convergence is not without its challenges. Healthcare providers are now in competition with bricks-and-mortar retailers. This new dynamic has triggered a competitive race for premium retail spaces, making the real estate landscape a crucial player in this growing trend.

Evolving real estate needs and investor confidence

With retail healthcare trends gaining traction, the real estate demands of the healthcare industry are evolving. Gone are the days of building standalone medical campuses—now, healthcare providers are after retail spaces, aiming to reap the benefits of the foot traffic, convenience, and accessibility these locations offer.

This new direction in healthcare delivery is boosting investor confidence in medical office buildings, with average asking rents rising and development strongly linked to population growth. As the demand for healthcare grows, real estate is playing a pivotal role in creating more efficient and accessible healthcare systems. This ongoing evolution is setting the stage for sustained growth and expansion in the healthcare real estate sector.

The commercial real estate perspective

If you’re a stakeholder in the commercial real estate industry—be it an investor, broker, developer, designer, or property manager—you’re likely turning your focus to healthcare real estate portfolios. Hospitals and health systems are viewed as creditworthy tenants with predictable needs, making healthcare real estate a highly desirable and stable investment alternative compared to retail, office, or hospitality assets.

The growth of bricks-and-mortar spaces for healthcare is having a significant impact on the commercial real estate industry. The emphasis on smaller, more flexible healthcare facilities that can be located within retail spaces is leading to a few things:

• Increased demand for retail space. The trend is driving up demand for retail space, potentially leading to higher rents and increased competition for prime retail locations.
• Repurposing of existing commercial space. Vacant department stores or other large retail spaces may be converted into multipurpose medical facilities housing a range of healthcare services.
• Changes in facility design and construction. The design and construction of healthcare facilities are changing to accommodate smaller, more flexible facilities that fit within retail spaces.
• Greater emphasis on customer-centric design. With healthcare facilities aligning more closely with the retail environment, a greater focus is being placed on creating customer-friendly spaces. This includes retail-style displays and signage, welcoming waiting areas, and a focus on creating an overall more pleasant and less intimidating healthcare experience for patients.

So, what does all this mean?

The convergence of healthcare and retail is more than a trend; it’s a fundamental shift in how we think about healthcare delivery and real estate. We’re not only witnessing a change in healthcare delivery methods, but also in the way we perceive and use retail spaces. This change is reshaping the idea of retail real estate, encouraging those involved to reevaluate their approaches and welcome this new landscape.

Remember, this new era of consumer retail healthcare is just beginning. As this evolution continues, those in the commercial real estate sector must be prepared to adapt and innovate, embracing new strategies and solutions that align with retail real estate trends and the changing needs of the healthcare market. With a strategic mindset, innovative solutions, and a deep understanding of the evolving market, the commercial real estate industry is not just set to survive, but thrive in the age of retail healthcare.

Source: “How Retail Healthcare Is Creating New Real Estate Opportunities“

It has been amply clear that both an uncertain economy and the remote work trend have taken a toll on the sentiment of tenants in the market, many of which have been deferring lease decisions to see how these trends will shake out. But which trend is the driving factor behind this reluctance? The answer would provide some insight into the long-term prospects of the office asset class.

CBRE has concluded that because leasing activity was strong for several months in 2021, it is more likely that cyclical events are the bigger influencer. If the economy calms down and becomes more even keeled, a rebound in TIM and leasing activity may follow.

Although New York City may not be a favorite place as far as living and housing, according to a recent GlobeSt.com report, it is a place where office requirements are up by 2% on a square footage basis. In fact, it was the only market where that number was up when compared with pre-pandemic levels at the end of 2019. Of the top 11 U.S. office markets tracked by CBRE, TIM levels increased in six and fell in five from six months earlier. Dallas and Boston have what CBRE calls “relatively healthy TIM levels, but Denver, Philadelphia and Seattle have the lowest. In between are Chicago, Los Angeles, Atlanta, Washington, D.C. and San Francisco.

TIM levels fell in six of nine industry groups between the end of 2019 and April 2023, with the tech industry’s average falling the most, down 44%, a reflection of the sector having one of the lowest average weekly office attendance requirements. These companies are most likely to reduce office square footage over coming years. Industries that have seen an increase since the end of 2019 include manufacturing and transportation, which are up 7%, retail trade is up 6% and finance and insurance are up 4%.

The survey also revealed that small space requirements for 10,000 to 20,000 square feet have increased by 7% as of this April. The request for larger requirements of 50,000 to 100,000 square feet, however, fell by a whopping 38%, followed by demand for 100,000-plus square feet also falling but by a slightly lower but still significant 36% number. This trend offers advice to building owners and leasing personnel looking to sign vacant space. For a win-win, they might consider dividing available square footage to sign leases and meet companies’ smaller needs. In other words, small is the new big.

Source: “What Is Really Driving Office Tenants Wait-and-See Attitude?“

Allen Sigmon Realty Group is teaming up with NAI SunVista, a full-service commercial real estate company, to handle its property management portfolio. This new strategic relationship went into effect July 1.

NAI SunVista will be responsible for managing the day-to-day property management for Allen Sigmon’s properties across New Mexico, which will include rent collection, maintenance of properties and the handling of tenant issues. NAI recently expanded its business by hiring seven additional employees, bringing their total to 75 employees and 31 brokers.

NAI is located at 2424 Louisiana Blvd. NE. CEO Debbie Harms said the company moved out of its previous location at 6801 Jefferson St. NE to help support its expansion.

Co-owner and principal of Allen Sigmon, Lance Sigmon, said he and his team interviewed a variety of firms but chose NAI because of their like-minded interest in the community and their commitment to growing their business. NAI currently manages 155 properties in Albuquerque and will add another 25 properties to their portfolio as a result of this deal.

Harms said Allan Sigmon’s property management portfolio will bring an increase in revenue and broaden the types of properties they manage. The company will receive a property management fee for managing the properties, she added.

“This strategic relationship with NAI will allow us to do more and grow our business throughout the Southwest,” Brad Allen, co-owner and principal of Allen Sigmon said. “We thought it was a great idea to team up with NAI because they are not only good at what they do, but they love doing it.”

By devoting more time to the acquisition and development of properties, Allen Sigmon hopes to add at least $800 million in total assets by 2033, Sigmon said. The company currently holds $275 million in total assets, he added.

As of today, Allen Sigmon is looking to acquire existing properties costing between $1 million and $50 million in various industries such as office, multifamily, retail, industrial and hospitality. In the second half of 2023, the company wants to acquire at least $20 million worth of real estate across the Southwest, with an emphasis on New Mexico, Sigmon said.

The company currently has two projects under development in Colorado and they are searching for new partners and properties to buy, Allen said.

“Allen Sigmon realized that property management takes a lot of time and energy, energy they would rather spend on development, ” Harms said. “They were aware of the type of property management that we do and the properties that we’ve taken care of. They wanted quality property management services that would help free up time to do what they’re really good at — developing.”

Allen Sigmon was founded in 2011 and has since grown to develop over 1 million feet of commercial real estate in New Mexico and surrounding areas. The company is currently developing projects in Albuquerque’s Uptown area, including a Marriott Element by Westin.

Source: “Allen Sigmon Realty Group enters ‘strategic relationship’ with NAI SunVista”