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The new Physicians Quality Care Clinic opened on Pleasant Plains Extended in Jackson in August, next to The Columns shopping area.

A Conversation with Local Real Estate Agents

Real estate for a medical office or clinic is not a new concept, nor one that may be related to retail real estate, but some real estate experts believe it may be time to rethink the correlation between the two.

Although medical office complexes still exist and thrive in the West Tennessee market, real estate agents and developers are noticing a new trend, especially among primary care physicians, toward following the crowd rather than a "if you build it, they will come" attitude.

"Medical office space is moving into the retail environment as many physician practices are looking for visibility," said Chris Carothers, of Hickman Realty Group, Inc. "Much like retail businesses, when choosing space to rent or a location on which to build an office, accessibility as well as convenience for the customer, i.e., the patient, are becoming very important considerations."

"I find that medical facilities are looking more into location," said Tammy Jones, franchisee and agent with EXIT Realty in Jackson. "Many clinics, orthopedic groups for instance, want to have more drive-by visibility. With the way the real estate market is changing, we have got to do different things; there is higher demand for medical office space and not just around the hospitals. Clinics are moving out to where the people are."

"It has been my observation of late that medical groups are tending to think more like retail stores," said Carothers. "I think that has had a big impact on the growing interest in the north area of Jackson as a prime location to put an office. People like the convenience of being able to do their grocery shopping, get their prescriptions filled and see their doctor all in the same area of town.

"In uses such as dental, chiropractic and walk-in clinics, you find they want to get in the high traffic corridors such as the 45 by-pass. They want to be right in the eye of convenience, which is something you would not have seen 10 years ago. The Physicians Quality Care clinic in the Columns off Pleasant Plains is a prime example of this trend of choosing locations with high visibility and accessibility."

"The difference in commercial and typical medical real estate development is that you have a large growth in an area in roof tops (homes), then you will see a growth in retail space with medical presence in an area following the retail," said Eden Smith, an agent with Coldwell Banker Real Estate Now. "Physicians are putting clinics closer to the patients and where they live. But medical still lags behind commercial retail development."

Because of the technology required, older buildings are not as viable an option as newer ones for medical offices. "Many times it is hard to use an older building for a medical tenant," said Carothers. "Due to their infrastructure, it can be hard and expensive to equip an older space with the updated technology. There is growth potential for administrative use in older buildings, but it is my experience that many medical tenants are more interested in new space or will consider tearing down an existing building that is in a location they desire and build a new building."

"In my opinion, for many medical offices, it is better to build their own space, unless they are taking over an existing medical space," said Jones. "Medical offices have certain requirements, such plumbing in each room or a high number of offices/exam rooms, which are unique to their industry."

"Medical buildings are more costly to build than basic commercial buildings," said Smith. "This is due to the type of technology and equipment going into medical space as well as building code requirements."

"Many times I am looking for a footprint on which to build for a medical client as opposed to existing space," said Jones. "As far as ownership of space, I see many cases in which the physician is taking on the role of owner, but there is still the more traditional lease/purchase or tenant type of client."

"One change I see in the marketplace is that developers on build-to-suit projects will include physicians in the property ownership," said Smith. "This can be an attractive option for the physician since they can receive additional income from the rental of the facility and, over the long term, the building can appreciate in value."

Developers like to see medical tenants in a development, and many times include service providers in their plans for developing an area. "In Jackson, medical plays a large part of anything," said Ben Truex, who is with Gary A. Taylor Investment Company, a commercial development company. "They are quality tenants that need to be a part of any development."

So it seems the old adage of "location, location, location" for commercial real estate applies in medical real estate. For many specialties, such as surgeons, obstetricians and others whose work is often performed in a hospital setting, geographic proximity to a hospital is a very strong determinant of office location. Primary-care physicians, such as family practice or pediatricians and even dentists or chiropractors, may not have as much of a need to be near a hospital. The trend for these types of offices is going more in the direction of retail office space, in that they follow the people. "I think the trend will continue of more medical buildings that are in retail developments or locations in close proximity to where the retail businesses are," said Smith.

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