How Health Care and Wellness Properties Can Anchor Mixed-Use Developments

The aging U.S. population could make this a commercial real estate trend to watch.

Mixed-use real estate developments typically feature a blend of retail, office and restaurants adjacent to a residential community. They are usually pedestrian-friendly and possess an aesthetic harmony that evokes Main Street nostalgia.

However, many wrestle with overwrought parking solutions (seas of asphalt) and a lack of authentic experiences for the consumer. But the real demon taunting retail-centric mixed use is an evolving and cyclical retail economy that’s playing havoc with absorption, occupancy rates and consistent year-round vitality.

Getting the Mix Right

So what could a recession-proof, sustainable mixed-use property look like? Imagine a cluster of medical service buildings alongside restaurants, lodging, apartments, entertainment, retail and consumer services. Retail as an anchor can be fickle and seasonal; multiple health care and wellness tenants can be more sustainable, especially with complementary development that fosters convenient and positive consumer experiences. (See related story.)

Consumers in all generations are pivoting from a “stuff and acquisition” mode to a “wellness and experience” mindset.  Consider:

• The demand for medical care facilities to serve both aging and health-conscious younger consumers will be trending upward for decades.
• The health care real estate model is in transformation. The era of monumental health care facilities (mega-hospitals and sprawling campuses) is coming to an end. They are not consumer-friendly and tend to be an unpleasant clinical experience.
• Health care workers, as well as patients, can benefit from access to a variety of consumer services.

The employees and visitors at medical facilities are a consistent stream of consumers who would likely appreciate the convenience of combining medical appointments with the ability to run errands — walk a short distance to a healthy meal, pick up medicine at a pharmacy, or stop by a coffee shop before or after their appointments. The consumer who goes to the doctor is the same consumer who shops, eats and seeks entertainment.

A Real-World Example

What would a health care mixed-use development look like? A mini-version has blossomed in Cincinnati.

The Rookwood Exchange, developed by Jeffrey R. Anderson Real Estate in 2013, is a 12-acre development anchored by a 260,000-square-foot medical office building. It features physician’s offices, physical therapy, six restaurants, two hotels, apartments, a parking garage, a social club, spa and vitamin retailer. The offices sit above street-level restaurants and services. The apartments have a dedicated parking garage, while the hotels and the office building share another parking garage.

As a mixed-use property, Rookwood is in the small category. So amp it up by a factor of 10 or 20 — what is possible on 100 or 200 acres? To start with, hundreds more apartment and single-family rental homes, retirement housing, an independent grocer, pharmacy, 24/7 dialysis center, 24/7 imaging center, daycare and elder care, fitness club, physical therapy/rehab facility, dental and optometry services, urgent care facility, coffee shop/juice bar — essentially the universe of health and wellness providers that consumers are seeking out — all conveniently located within a walkable mixed-use development.

What Could Go Wrong?

The short answer: money and government. The concept may seem elusively utopian and could cause some investors to balk. This won’t be done by a short-term investor. A well-capitalized long-term commitment is required.

The cooperation of visionary government is also needed. Today’s Euclidean zoning regulations are still stuck with the DNA of their 1920s origins. Renaming a zoning code as a planning code and adding a category called “mixed use” does not change its stripes. Many communities still need to rip up their zoning regulations and embrace true community planning — especially with regard to density, massing, heights, parking and setbacks. Another key component is a willingness by that same visionary government to commit to tax increment financing and revenue bond financing for infrastructure — which would include parking structures.

What is already going right is this: consumers have pivoted their mindset from “experiencing stuff” to “experiencing wellness,” and the real estate industry should respond with speed and conviction.