05.28.2014 LIBN | Urgent care centers paying top dollar for space
By Kristen D’Andrea
A rapidly changing medical landscape has both increased and altered the commercial real estate demands of the healthcare sector.
Local developers report more physician practices and outpatient centers are looking for retail spaces, as opposed to traditional office properties. Additionally, physician practices are demanding space in broader geographic areas around hospitals, and hospitals are becoming major tenants, to the surprise of some landlords.
The surge in occupancy and conversion of Long Island properties to medical uses has accelerated over the past few years, according to Herb Agin, CEO of Colliers International LI in Lake Success. As other industries consolidate, the expansion of medical space is picking up the slack.
“The medical field is the biggest driver for occupancy in the commercial real estate market right now,” Agin said. “Long Island would have a major problem without the explosion of medical.”
When Colliers sold 2000 Marcus Ave. in Lake Success to New Hyde Park-based Lalezarian Developers Inc., the former Astoria Federal Savings Bank building was converted to medical office space. The North Shore-Long Island Jewish Health System has since leased the entire building, Agin said.
A few miles to the east, Winthrop-University Hospital took an entire row of stores and low-end buildings in Mineola to create its $95 million research facility currently under construction at Mineola Boulevard and Second Street, Agin said.
Chris Damianos: Hospitals have become important tenants in office buildings. PHOTO: Bob Giglione/LIBN
Additionally, 125,000 square feet of the approximately 255,000-square-foot office building located at 200 Old Country Road in Mineola is currently devoted to medical office space.
“Five year s ago, only about 50,000 square feet was medical space,” Agin said.
In Garden City, offices affiliated with nearby hospitals, such as Winthrop and Long Island Jewish Medical Center, have become a vital part of the village’s tenant mix. Westbury-based Piermont Properties recently converted the 54,500-square-foot former retail and office property located at 623 Stewart Ave. into medical condominiums, which are just about to be sold.
“Doctors want to be in more retail environments than more traditional office environments,” said Michael Grey, president of Piermont Properties.
There has been a proliferation of outpatient walk-in clinics and urgent-care centers developed in Manhattan, the boroughs and out to the suburbs, Grey said. Years ago, there was a stigma among real estate professionals regarding walk-in clinics located in shopping centers, he said, noting it was assumed landlords had to settle for nontraditional retail tenants.
“Now it’s considered much more mainstream,” Grey added. “Those tenants are competing with some of the nation’s top retailers and paying retail prices.”
PM Pediatrics, for example, is a specialized urgent-care practice with 10 locations throughout New York and New Jersey. Last month, its fourth Long Island-based practice opened in a 4,834-square-foot office in the Toys ‘R’ Us shopping center on Old Country Road in Carle Place. PM Pediatrics’ other Long Island locations are also located in strip malls and shopping centers, in Syosset, Selden and North Babylon.
Represented by Garden City-based Sabre Real Estate, CityMD Urgent Care, which recently acquired Premier Care, operates several dozen urgent-care centers throughout the New York metropolitan area, including 14 locations on Long Island.
The emergence of urgent-care centers is the best example of the medical world merging with the retail world, agreed Jayson Siano, Sabre’s managing principal.
“Many of the intelligent pioneers in retail business saw this coming,” he said, noting some anticipated the appearance of “untraditional tenants” in shopping centers. “In addition to medical, we’ve seen churches, schools and universities start taking retail space.”
Siano questions whether the stigma is entirely gone, however. While locating urgent-care centers in shopping centers is not frowned upon by consumers – and is no longer the negative it once was in the real estate community – landlords prefer retailers who will complement the rest of a shopping center’s retail base, he said.
“That being said, urgent-care centers are filling a void and willing to pay premium rent for AAA real estate,” Siano said, adding nearly all of the Blockbuster and Hollywood Video locations on Long Island have been converted into urgent-care centers.
One of the major appeals of retail space for medical tenants is the general abundance of parking. Most of Long Island’s office space was built years ago and required fewer parking needs.
“Today, [a smaller parking ratio] might be fine for certain office uses, but it might put a strain on medical uses” where access and ease of drop-off are concerns, Grey said.
Buildings with good ceiling height that can accommodate separate HVAC and plumbing systems are among other criteria sought by medical tenants, said Chris Damianos, principal and partner at Damianos Realty Group in Smithtown. In the past, solo practitioners might have taken up 1,000 to 2,000 square feet of office space; today, practices tend to be larger, requiring 5,000 square feet to 20,000 square feet to accommodate multiple doctors and exam rooms, he said.
Two years ago, Damianos bought a building in Islandia on the North Service Road between Veterans Memorial Highway and Motor Parkway. Attracted to the building’s geographic location and easy access to the Long Island Expressway, North Shore-LIJ has leased nearly 20,000 square feet in that building, as well as additional space in Damianos’ buildings in Smithtown and Babylon, traditional capture areas of St. Catherine of Siena Medical Center and Stony Brook University Hospital, and Good Samaritan Hospital Medical Center and Southside Hospital respectively, Damianos said. Meanwhile, Peconic Bay Medical Center has taken space in Damianos’ Center Moriches shopping center and Stony Brook has been in various locations, he said.
“They’re all moving around and jockeying for position between the various groups,” Damianos said.
In addition to spreading out into broader geographic locations, hospitals continue to vie for spaces close to home. Six years ago, when Damianos built a two-story office building directly across the street from Brookhaven Memorial Hospital Medical Center in Patchogue, he figured medical tenants would be drawn to its close proximity to the hospital.
“We do have a number of medical tenants, but what we did not expect is that Brookhaven Hospital became a major tenant in the building,” he said. “They had their own space needs that we were able to accommodate.”
Good Samaritan Hospital in West Islip, Southside Hospital in Bay Shore and John T. Mather Memorial Hospital in Port Jefferson are all tenants of Damianos’, in addition to North Shore-LIJ, Peconic Bay Medical Center and Brookhaven Hospital.
“Twenty years ago, none of these were tenants of ours,” Damianos said.