Q: I have a very small hotel that used to be popular but the area has become less desirable to tourists. The only steady clientele now are mainly visitors to a nearby hospital, though not enough to sustain the business. I’m thinking of upgrading the premises into a more boutique-style hotel, but am not confident that the capital outlay would mean an increase in tourism. What do you suggest?


A: Rather than upgrade your premises in the hopes of attracting more business in an ebbing market, rethink the current use of your commercial real estate. Consider your neighbours and what the area can sustain. Few specialized markets come with guarantees of industry growth. Of necessity, Health Care stands out as our single most in-demand service with the highest growth rates. Assisted living facilities and other medical support centres offer various possibilities. Alive and well, the medical centre niche market will deliver excellent returns in the years ahead. Mid-range commercial real estate investors can benefit just like the big guys do when renovating for, and so investing in, the multi-billion dollar Health Care commercial realty market.




Rx: New or Relocating Practice Dx: Medical Centre

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Medical Centres boast healthy bottom lines for commercial real estate investors.

When entering private practice, newly trained physicians today consider the expense of buying a commercial address- not to mention the subsequent property management commitment -more than they care to manage while launching a medical career. Add to that the harsh reality, in most cases, of enormous student loans effectively debilitating any thoughts of owning a place in the foreseeable future upon which to hang a newly minted shingle. In tandem, within the medical community, there also exists a traditional relocation reticence among practiced physicians for a variety of reasons, the most notable of which is to avoid any disruptions of essential medical services.


Most physicians will opt to practice for years in cramped spaces rather than move ahead with addressing the spatial demand of an expanding patient base. When a move is made, therefore, it is to a substantially larger, more customized, facility with a location that suits their patients even more than it may suit the lease-holding physician. Typically, doctors then imagine themselves to be practicing from the new location for the remainder of their professional career. Naturally, such a protracted upgrade must meet criteria in the present and well beyond to justify relocating any medical practice.

Commercial Property Repurposing: Medical Renos and Rehabs

Corporate acquisition of buildings designed or modified especially to accommodate Health Care professionals have become as commonplace as the medical plazas themselves. With our aging population of baby boomers expected to increase health care needs by a third or more over the coming decades, this type of property investment also offers a steadily expanding niche market to the smaller commercial real estate investor. While financing structures and specialized renovations to create medical plazas of any size requires considerable financial investment- averaging 25% more than standard commercial renovation -even smaller Health Care centres with six medical suites or more will tend to net profits in the million dollar range when substantially leased, outperforming retail’s real estate sector by a healthy margin. There is ample opportunity for mid-range commercial investors to buy, renovate and sell newly established medical buildings, reaping excellent returns within a relatively short time frame.


Overcrowded waiting rooms are a typical reason Physician’s cite when relocating

The type of building best suited to medical use rehabilitation, like all real estate, puts location first on the list of important attributes. Close proximity to major medical services, such as a hospital or dialysis clinic, and/or to large assisted living facilities are among the best locations for medical centres dedicated to private practice. Transportation and parking are also important to an aging population facing mobility challenges. Older retail buildings, plazas, and any commercial real estate falling into obsolescence are all likely candidates for a medical ‘facelift.’

Developing Health Care Centres and Medical Plazas

Finding a location worthy of rehabbing into a medical facility is not the main challenge in this type of investment. Choosing appointments wisely is. Investors must balance budgets with the expectations of a burgeoning marketplace. This is not a time to skimp on size or quality. Spacious medical suites with adequately-sized waiting areas, highly safe and durable finishes, and an abundance of equipment space is the best protection you can give your investment when seeking both tenants and future buyers. Whether creating six or sixty medical suites, developing a Health Care plaza in an appropriate location with more than adequate appointments is a sound investment that will yield the highest returns.


A bright, soothing and spacious environment helps the medicine go down

Choose a contractor who is experienced in creating medical spaces. This is a highly specialized type of renovation best not left to any chance. Look for a successful track record in Health Care renovations. Visit medical facilities in your area, making note of outstanding features. If there is a central waiting area as part of your design, try to add a fish tank or some other water feature. Even a small fountain has a soothing effect. That which is of comfort to patients is valued by Health Care practitioners, and may give you an inexpensive yet integral edge when resale time rolls around.

Anchor Medical Plazas with Complementary Health Care Tenants

Securing your first tenant is another important aspect of creating a successful facility. Anchor your developing medical centre with a pharmacy, lab, physiotherapist, dentist, optometrist or similar Health Care professional before offering space to physicians. While proximity to a hospital may supersede all other requirements, medical doctors do prefer to see a major support service in place before they will commit to a long-term lease. A pharmacy, for instance, is a premium leaseholder looking to anchor themselves in close proximity to prescribing physicians. Acquiring a long-term lease with a reputable dispensary helps establish your new facility’s credibility and feasibility.


A modest lobby café or full-service restaurant adds desirability and value to your Health Care hub.

Another wise move for any commercial property catering to a dynamic clientele is to add a coffee shop or, depending on size, even a restaurant. You’ll attract more rental dollars and a solid leaseholder for this space if there is outside street access directly to a coffee bar than if customers can only access from the interior, such as with a lobby kiosk. A take-out window for foot traffic is also desireable, so as not to clog patient areas. Situate the food and beverage service so that everyone knows it’s there, but those on restrictive diets are not forced to sit next to it. Whatever amount of space you can grant to food and beverage service, do so, and be sure to choose a reliable tenant who will be sensitive to their target market, with high-quality products and who delivers excellent customer service – all of your tenants and their neighbours may soon be counting on them to kickstart their morning, or to provide a quick, nutritious lunch in an otherwise unpalatable day.



Selling Your Health Care Facility

Buyers of Medical Centres are generally large corporations with deep pockets and strict parametres. Your commercial real estate agent can assist you in comparing facilities currently owned by multi-facility Health Care operators in your region. Taking this step early on in your process will help inform and guide both your location and renovation choices. Health Care is very much a build-to-suit marketplace today, so taking time to be sure you are developing what the market most desires in medical facilities is more than an investment exercise, it’s your gateway to healthy profits.

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