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. 

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.

Joseph Ballmer is a real estate executive and registered architect.