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Retail Glut Gives Healthcare Systems Another Avenue For Growth

Building Design+Construction | January/February | John Caulfield, Senior Editor

In March 2019, it was news when 66,000 sf inside a former Acme supermarket in Moorestown, N.J., was converted to the Virtua Samson Cancer Center with two linear accelerator vaults that each cost between $1.5 million and $2 million.

A year later, the coronavirus was declared a pandemic and turned Americans’ shopping habits upside down. While grocery stores were among the “essential” businesses that could continue to accept customers, most retail outlets were limited to online sales and at-home delivery. Purchases transacted via the Internet—which had been chipping away at brick-and-mortar dealers’ market share even before the pandemic—accounted for 19.3% of retail sales in the third quarter of 2020.

By mid-November, 14,464 retail stores had closed in the U.S., according to retail analyst Walter Loeb, who predicted more fallout in 2021.

These closings—many of them permanent—left “a glut of retail space available,” says Aran McCarthy, AIA, NCARB, Principal–Healthcare for Francis Cauffman Architects (FCA), the designer on the Acme/Virtua Samson conversion project. And some healthcare systems have been looking to fill the vacated spaces with clinics and other care facilities.

One in five malls in America has at least two “dark” anchors with two or three floors empty, estimates Brad Earl, AIA, NCARB, SSGB–Healthcare, Managing Principal at Nelson Worldwide’s healthcare architecture studio in Philadelphia. He notes, too, that shopping centers are typically within five to eight miles of hospitals that, in many cases, are pushing services closer to where their patients live.

“What we’re seeing are large, vacant boxes that are in the right locations” for adaptive reuse to healthcare facilities, says Earl. These malls also offer large parking lots and in-place infrastructure that would accommodate such conversions.

Nelson has been working with Ascension Lourdes Hospital to convert a former two-story, 150,000-sf Sears store in the Oakdale Mall in Johnson City, N.Y. The 75,000-sf second floor would devote 40,000 sf to clinical space, with the remaining square footage on that floor used for offices and a microbrewery. The ground floor would include a 38,000-sf wellness center and 12,000 sf for sports medicine.

McCarthy says that when developers and healthcare owner-operators are considering a retail-to-healthcare option, location is their top priority. “Is the building visible, knowable, and accessible? When it’s converted, will it have the look and feel of a healthcare center?”

McCarthy notes that vacant big-box retail stores have high bays, so there’s plenty of room for new mechanical installations and dropped ceilings.

“You wouldn’t have to cut up many of the fixed elements,” like walls, McCarthy says. What would need to be added, however, are plumbing and drainage.

A new level for one-stop shopping

Another reason why this retail-to-healthcare trend makes sense: it’s consumer driven. Having a healthcare facility in a mall or strip center where people go for other things like clothing, jewelry, food, or personal services offers another level of convenience, say AEC firms.

“Systems are looking at retail space because consumers like the one-stop-shop aspect,” says Al Thompson, Managing Executive and Studio Director for TPG Architecture in Melville, N.Y.

Thompson says his firm is seeing retail-to-healthcare conversions in New Jersey, Long Island, and Westchester, especially for systems looking to provide out-patient ambulatory services. For example, an outpatient campus for Northwell Health in River-head, N.Y., is converting a former PC Richard & Son consumer electronics and appliance store across the street from the hospital into a 7,700-sf healthcare facility with IV beds for oncology, a pharmacy, and other services. This facility was scheduled to open in January 2021.

While conversion costs vary based on location, the condition and size of the building, and other factors, turning a retail store into a healthcare facility with operating rooms can run $600,000 to $800,000, estimates FCA’s McCarthy. A conversion to a general practitioner’s office might run up to $200,000.

Nelson’s Earl estimates that conversion costs average between $130 and $150 per sf.

AEC firms that have tackled retail-to-healthcare projects say the biggest expense is modifying the space to get its operating systems up to healthcare standards in terms of plumbing, HVAC, and indoor air quality. “The good news is that many retail stores have their own HVAC systems,” says Helen Herrick, New York Studio Director for MBH Architects.

Her firm has worked with Align Technology—the manufacturer of 3D digital scanners and clear teeth aligners that markets its orthodontic treatments under the Invisalign brand—to adapt various mall spaces for Invisalign’s offices and showrooms. MBH has also come up with a conceptual design for a dentist’s office in a shopping mall, although Herrick says this project is on hold.

Herrick observes that some mall owners may not be enthusiastic about having healthcare providers as tenants because healthcare facilities generally don’t have the kind of ambiance that draws shoppers. “Healthcare has to up its game” and move away from plain-vanilla presentations, she says.

Another concern is competition: healthcare isn’t the only sector that covets vacant retail space. But Earl doesn’t think this is a problem; he points to the Exton (Pa.) Square Mall that has 30,000 sf of healthcare services next to entertainment-gaming space.

“There’s enough empty retail space for every-one,” he says.


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