The retailization of healthcare real estate is increasing, particularly in major metro markets with limited land for new construction. Healthcare facilities are not only moving into retail centers, but investors are also employing adaptive reuse to repurpose real estate into healthcare facilities.

“Repurposing and retailization of healthcare is on the rise to support provider outpatient strategies,” Mike Conn, EVP at Meridian, tells GlobeSt.com, tells GlobeSt.com. Most major MSAs are mature markets and have been largely developed, so the remaining opportunities are in dense, urban infill areas for the conversion of existing buildings as opposed to ground-up development of vacant lots. Adaptive reuse can save time and money, thus reducing costs and improving speed to market. Meridian is grateful to be part of this trend of advancing healthcare by providing greater access to care at more affordable costs.”

Conn recently sold a 9,200-square-foot dialysis clinic in Downtown Long Beach at a 5% cap rate. The facility is a perfect example of the rising trend in healthcare real estate. It was a creative adaptive reuse project, and Conn says the building required significant changes to meet city standards. “Due to the legal, non-conforming setbacks of the building, the city of Long Beach planning department required Meridian to maintain the existing north and west elevations on one of the structures facing Atlantic and 11th Avenue,” says Conn. “This created an incredibly complicated repurposing of the current structure; however, we were able to work with city staff and create the necessary findings that allowed us to maximize the building footprint and parking, while working within the existing zoning limitations.” In addition to the original adaptive reuse redevelopment, Meridian also had to extensively repair the property after a fire damaged it during escrow. “Additional structural retrofitting and shoring needed to be constructed in order to abate the hazardous materials prior to demo. As a result of the fire and zoning restrictions, we had to use several different structural methods to complete our conversion while keeping the existing walls,” says Conn. “This included shotcrete on existing brick walls, additional shear on existing wood framing, new glue-lam beams and steel bracing, and strapping to tie the new roof diaphragm to the existing sidewalls. The new south and east elevations were constructed to match the existing north and west elevations in order to meet city planning requirements.”