Transforming Former Retail Spaces into Outpatient Facilities

By Aran McCarthy 

In recent years, the landscape of healthcare infrastructure has undergone a significant transformation. With the closure of many hospitals and the relocation of medical professionals, we’re seeing a growing need for enhanced access to healthcare across the United States. A study from Drexel University noted that a substantial portion of the U.S. population residing in the suburbs lacked health insurance and experienced difficulties accessing care. The renewed importance of providing accessible healthcare has prompted a number of innovative solutions to address this growing demand. One such method gaining traction is the adaptive reuse of former retail buildings, offering a sustainable and cost-effective solution to fulfill community needs.

Prior to the pandemic, healthcare systems were already grappling with the challenge of decentralizing services and enhancing accessibility to localized caregivers. Rising lease costs and the need for cost-effective solutions fueled the consolidation of outpatient practices. However, the onset of the pandemic accelerated this trend, intensifying the pressure to expedite these efforts. With a stark downturn in big box real estate due to the lack of in-person traffic, a unique real estate opportunity arose for healthcare systems to repurpose these spaces into medical facilities, providing a ready-made solution to their growing needs. Adaptive reuse of former retail buildings offers a sustainable and cost-effective solution to better fulfill community demands and is continuing to gain traction today.

As more healthcare systems consider outpatient consolidation efforts in former commercial spaces, there are several key considerations to evaluate before committing to an adaptive reuse approach and site.

Construction Benefits of Adaptive Reuse

One of the primary advantages of repurposing former retail spaces for healthcare facilities is the speed to market. A traditional new building project can take years, whereas adaptive reuse may take several months, depending on the project’s scale. Unlike new construction, which can be labor and resource intensive, adaptive reuse projects can leverage existing infrastructure, significantly reducing construction timelines. This transformation is also a sustainable way to repurpose existing buildings while reducing material waste and consumption.

These projects can also offer inherent advantages when it comes to zoning and local permit approvals. Former retail spaces are frequently situated in established commercial zones, streamlining the permitting process and minimizing regulatory hurdles. Without needing to disturb the land by creating added parking or site elements, the land development approval process can be substantially simplified (although local zoning approvals should be researched in advance to avoid any unexpected obstacles). Additionally, these locations are often already recognizable and accessible to local communities, fostering a sense of familiarity and convenience for patients.

Repurposing existing buildings also typically incurs lower long-term rent costs compared to building from the ground up. Landlords recognize the stability of healthcare tenants, and can offer competitive leases for their empty commercial properties—a solution that ultimately benefits both parties. This financial advantage makes adaptive reuse projects a more sustainable option for healthcare systems, allowing them to allocate additional resources toward patient care rather than overhead expenses.

Site Considerations and Potential Pitfalls

While retail-to-healthcare adaptive reuse presents numerous benefits, several considerations must be addressed prior to signing a lease to ensure a successful bottom line. This underscores the importance of involving relevant professionals from the onset. These experts can help conduct the necessary due diligence during the scouting phase and help to determine the scope of the project.

Site selection plays a crucial role in determining the viability of a location. Factors such as entire costs, compatibility with adjacent practices, and lengthy lease terms must be carefully evaluated to mitigate financial risks. Attractive rent with lower cost-per-square-foot and a larger tenant improvement subsidy is just one metric. In actuality, we have observed that these costs have a disproportionate impact when selecting real estate, as other unanticipated expenses and hurdles may appear during renovation. Therefore, design professionals should be involved in the site selection process in order to determine the structural benefits and pitfalls associated with a building, especially when it comes to specialty practices. Professionals can further consult on location planning with key elements such as patient experience in arrival, parking, wayfinding and use of the building, the ability of the loading dock to support updated needs, or space for adjacent expansion and long-term flexibility.

As an example, we recently worked on several multi-floor projects that require careful consideration to accommodate large, heavy equipment. Before committing to a lease, it is important to ensure the floor structure can handle the vibration and weight of specialized equipment, such as advanced imaging. In contrast, for the Hackensack Meridian Health and Wellness Center at Eatontown, we transformed a former Toys “R” Us retail building into a multi-practice ambulatory care facility. This layout provided the ideal structure for the outpatient facility, with an expansive footprint and tall ceilings, all built on a sturdy first floor.

Due to the fact that each structure comes with its own set of benefits and challenges, from utilities to structural constraints, the most successful retail-to-ambulatory conversion projects are ones with a strong understanding of the limitations from the start in order to avoid unexpected costs during the renovation process. Moreover, it’s essential to consider the unique needs of healthcare providers and caregivers. While standardization offers efficiency, customization may be necessary to accommodate specific workflows and patient preferences. Balancing these requirements while optimizing space utilization requires careful planning and stakeholder engagement. Bringing on design professionals early in the planning phase is critical to identify challenges in advance and proactively develop solutions.

Involving the Proper Expertise

To get ahead of the potential pitfalls of adaptive reuse and set the renovation project up for success, you must engage experts with the requisite knowledge for successful execution. Design, project management, and construction teams with experience in healthcare facility conversions can navigate the complexities of such projects effectively. While cost considerations are important, prioritizing expertise over budgetary constraints is crucial to achieving desirable outcomes. Expectations of costs associated with design and construction must be influenced by real-world knowledge, factoring in challenges with lead times, accounting for inflation, labor supply and subcontractor availability, in addition to experience, ongoing fluctuations in material availability, and labor pricing. Too often, budgets are set based on previous project knowledge, not factoring in the changes in construction and design costs, market conditions or industry trends.

Multi-practice outpatient suites require immense planning, especially considering the number of walls needed to create an abundance of exam rooms compared to an in-patient suite. With the increased amount of architectural and planning time needed, costs also rise. By aligning expectations and embracing innovation, stakeholders can collaborate effectively to maximize the potential of adaptive reuse projects.

It’s clear that the adaptive reuse of former retail facilities will remain prevalent in the coming years, and presents a compelling opportunity to enhance healthcare accessibility for communities across the United States. This solution affords property owners, healthcare systems, and design professionals with the ability to leverage existing infrastructure while minimizing construction timelines and regulatory hurdles. This strategy serves not only to increase the accessibility of health services in the areas in which they operate, but also provides a model and means of accommodating the growing demand for accessible healthcare environments nationwide, ultimately yielding spaces that are more holistically ingrained in the lives of the people they serve.

Aran McCarthy, AIA, NCARB, is President of FCA.