REAL Exclusive Magazine

Shopping Center Industry Coins “Med-Tail”

By William Henry PhD

A New Acronym For Medical Clinics Locating In Retail Centers

Recent Moves to Retrofit Existing Commercial and Retail Space Spurs Demand for “DESIGN DUE DILIGENCE’

Diversion of retail sales from traditional ‘sticks and bricks’ retail centers to internet sales leads to ‘Med-Tail’. At the annual Florida Conference of the International Council of Shopping Centers ‘ICSC’ a new acronym was coined from the presentations to describe the migration of many walk in clinics, medical diagnostic centers and outpatient treatment areas into vacant spaces once housing retail uses. The term to describe it was referred to as ‘Med-Tail’. The retrofits of retail space, many hit hard by the lingering effects of the recession, was often attributed by several speakers to the siphoning of retail sales from traditional ‘sticks and bricks’ retail venues to internet sales.

The retrofit of traditional retail centers into medical and other assembly uses may have unintended consequences. Speakers reiterated that one cure for high vacancy rates in traditional retail centers is diversifying the tenant mix into non-traditional uses. However the challenge of converting– say a restaurant into a medical clinic– is that the applicable governing building codes may shift. The cost impact of improvements needed to adhere to these new code provisions may render the planned improvements and project unfeasible.

Design due diligence may be needed in addition to the traditional building construction report often required by lending institutions. Therefore it is prudent for brokers and investors to recommend performing ‘design due diligence’ concerning the planned use and occupancy of existing space prior to closing. Notwithstanding the appeal of the existing building improvements and the appearance of defect free construction– there is no guarantee that the space can easily accommodate different occupancies without making major design and construction modifications. These could negatively impact BOTH the projected cost and schedule.

Lease exclusives may impede non-traditional uses. For instance, uses once considered taboo to many retail brokers include private and public charter schools and/or faith based uses such as churches and congregations. These are now becoming the norm. Often anchor retail tenants that include well known grocery and so called ‘big box’ national ‘credit tenants’ have negotiated lease exclusives prohibiting these from co-locating in the same retail center. In this case seeking experienced legal counsel is imperative.

Placing assembly uses in retail space may trigger onerous building code and ADA building deficiencies. In addition the governing state building code– as well as local fire marshals– have very strict fire protection ordinances that apply to such assembly uses. The accessible routes for challenged customers with disabilities and other American Disability Act requirements can come into play. These emanate from the cost basis of new construction voiding ‘grandfathering’ provisions. The upgrades required to meet the most recent 2010 codes may render planned improvements null and void. Noncompliance leaves both the tenant and landlord open for potential discrimination complaints filed with the Federal Courts.

Land use modifications and zoning changes may threaten the project. Such uses may trigger attempts at land use or zoning modifications into classifications that are prohibited in certain commercial zoning classifications. Just as unwieldy is the requirement for a special use permit or traffic studies that can add months to the approval process.

It is best to retain a licensed architect to conduct this design due diligence prior to irrevocable financial commitments — Either the lessor or the lessee and/or their management companies should commission such a study prior to such innovative retrofits of pre-existing retail space.

RGA-Design LLC and our affiliate Design Due Diligence LLC perform as forensic and expert witnesses to conduct these studies on an on-going basis.

William Henry PhD is the Principal in Charge of RGA-Design, LLC a full service architectural and interior design firm that has served as the architect of record for over 1,000 projects across the State of Florida (Registration number AA0003523). He has lectured and written widely on the above topic. His most recent publication is ‘Return of the Master Builder’ available on Amazon Kindle e Books. Henry’s contact information is whenry@rga-design.com; (813-226-2220 Ext204) or visit the company web site at www.rga-design .com or www.buildingdoctorfl.com.

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