Craig Pryde – Why MOBs Are Just What Vacant Retail Ordered

Illinois Real Estate Journal

February 24, 2016

Since the recession, the vacancy of big-box and strip-center retail space has created leasing opportunities for other sectors, particularly healthcare, which continues to grow. With the recent announcement that Walmart will be closing more than 150 brick-and- mortar stores in the U.S., including two in Illinois, it’s important to understand the opportunities and challenges inherent to adaptive reuse of retail spaces into medical office buildings (MOBs).

Retail space can be a natural fit for adaptive reuse into MOBs, as they are generally in high-traffic areas with easy accessibility. Access is critical for baby boomers who, according to the US Center for Disease Control, are the highest users of medical services. Plus, the structures do not require extensive demolition, making the expansive space and tall bays easier to renovate.

Although the location and square-footage might be ideal, it’s important to recognize that healthcare services are constantly evolving – and so is the space. Understanding the needs of MOB operations, as well as how to adapt the space over time, is paramount to keeping costs down and customization high.

Despite MOBs’ changing services, most facilities share common elements; waiting/reception areas, nurse stations, lab space, linen storage, exam rooms, procedure rooms, public and private toilets, and some specialty uses such as X-ray or imaging. These specialized spaces can present challenges in renovating the retail infrastructure, which may not be able to handle the increased mechanical, electrical and plumbing loads.

For instance, because MOBs require several interior spaces, rather than a large retail environment, they also demand greater control of HVAC equipment. This additional zoning may not be available through the existing HVAC units, and need to meet building codes, which require increased amounts of outside air and air changes per hour. As such, HVAC systems should be designed for flexibility as the functionality of the rooms change over time, and accommodate for growth as administrative space may be converted into exam rooms.

While large retail spaces tend to have sufficient electrical power available to meet the high-usage of medical suites, smaller retail buildings may have insufficient supply. One solution is to install fixtures that use LED lighting, which will help reduce the amount of energy used and, thereby, save the tenant money over time.

Perhaps one of the most significant considerations of retail-to-MOB renovations is water usage. The high demand of water necessary for medical suite operations, along with the interior layout that may require additional fire sprinkler installation, can dramatically affect the size of the water service. Plus, retail spaces often have limited water distribution systems, which may require modification of existing floor slabs for proper design and connection into existing services.

Adaptive reuse of retail facilities into MOBs is often less expensive than new construction by as much as 30 percent, making it an attractive option in terms of cost, logistics and operations. But in an industry as innovative as healthcare, adapting space for the needs of an MOB today is as important as positioning it for the needs of tomorrow.