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Updated: July 23, 2019

Malls are filling their empty spaces with doctor's offices

Photo | Flickr via JJBers The Enfield Square mall.

As malls search for innovative ways to draw in shoppers and fill empty storefronts, they are turning to unexpected partners: health clinics.

Mall of America in Minneapolis, America's largest mall, announced plans last week to open a 2,300-square-foot walk-in clinic in November with medical exam rooms, a radiology room, lab space and a pharmacy dispensary service. Mall of America is teaming up with University of Minnesota physicians and a Minnesota-based health care system to operate the clinic.

The health care industry in the United States has ballooned to $3.5 trillion a year and retailers are increasingly trying to latch onto the booming market.

Mall of America's concept is part of a small but growing trend of mall owners tapping health care providers to help them reinvigorate their shopping centers.

While mall leases for clothing retailers declined by more than 10% since 2017, medical clinics at malls have risen by almost 60% during the same period, according to Drew Myers, real estate analyst at CoStar Group. The growth of medical clinic leases at malls has been the "strongest among all major retail sectors over the past five years," he said.

Mall landlords are betting that when patients visit for a flu shot or eye exam, they'll shop around for clothes or electronics. Adding medical clinics also makes sense for mall owners because they draw in doctors, nurses and technicians every day who may shop and eat at restaurants, according to a May research report by real estate firm JLL. Health care providers are also attractive tenants for mall landlords because they tend to have high credit ratings and sign longer leases compared with other retailers, JLL analysts noted.

On the provider and health insurer side, shopping malls give companies convenient locations to set up outpatient care posts and preventative care locations for patients. Providers are increasingly looking to these lower-cost clinics to help patients avoid expensive trips to the emergency room.

"It's a nice, symbiotic relationship," said Todd Caruso, senior managing director at real estate firm CBRE. "It fits both the hospital system and the property owner."

Caruso said that malls are unlikely to put medical clinics "between Lululemon and the Apple store" because they do not bring in a flood of customers. But clinics could help landlords replace parts of shuttered department stores.

"What class 'B' or 'C' mall doesn't have a wing that's either dark or a little sleepy?" he said.

'Medtail' growth

Health clinics at malls are an evolution of "medtail" — the blend between retail and medical services.

Today, mall clinics offer eye care, vaccines and flu shots, routine health exams and treatment for less severe illnesses like sore throats and fevers. But malls will expand to primary care, specialty care and management of chronic diseases, such as diabetes, JLL analysts predicted.

One example of the next stage of health care in malls: The Dana-Farber Cancer Institute is planning a 34,000 square-foot oncology and hematology outpatient facility in the Patriot Place shopping center in Foxborough, Massachusetts.

Like malls, brick-and-mortar retailers are also turning to the health care industry for growth.

CVS completed its $69 billion acquisition of Aetna, the largest health care deal ever, last year. CVS has added MinuteClinic locations that offer basic care for strep throat or ear infections and recently announced plans to remodel 1,500 "HealthHub" stores to treat patients with chronic conditions. Those stores include on-site dietitians, nurse practitioners, lab services and medical supplies on the shelves.

Meanwhile Best Buy bought GreatCall, the maker of Jitterbug cell phones with big buttons and bright screens designed for senior citizens. Walmart is also beefing up its presence in the health care sector.

Health care "will be a bigger part of what we do at Walmart," CFO Brett Biggs said in March.

— CNN Business' Tami Luhby contributed to this article.

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