The Marketplace Mall in Rochester, NY, has a food court, arcade games and plenty of fashion boutiques. Soon, it will perform hip replacements and rotator cuff surgeries, too.
A closed Sears department store and an adjacent wing of the mall are being reborn as a roughly 350,000-square-foot orthopedic healthcare campus. It will include operating rooms, outpatient facilities and medical and administrative offices.
The University of Rochester Medical Center’s $227 million project is part of the recent boom in mall-to-medical conversions. Malls have long been home to urgent-care facilities or doctor’s offices. But in recent years more property owners have started turning entire sections over to hospitals or clusters of medical tenants.
Closed department stores and rising vacancies, which accelerated during the pandemic, mean landlords are increasingly desperate to fill big blocks of space. Medical tenants, along with schools and warehouses, offer a way to do that.
They represent the latest sign that mall owners are focusing their efforts to offset declining retail business with new offerings and services that can’t be easily replicated online.
Many medical providers, meanwhile, have been looking to expand amid rising healthcare spending. Malls offer cheap real estate, ample parking, easy access to highways and plenty of nearby customers.
Covid-19 turned hospitals into de facto coronavirus wards. That forced them to forgo profitable elective surgeries—such as knee replacement or hand surgery—and it highlighted the need for outpatient facilities far away from contagious patients. Malls often fit the bill.
“The pandemic has exposed to many more people the hospital’s financial reliance on surgeries in order to be solvent,” said Leonard Berry, a professor of marketing at Texas A&M University’s Mays Business School who has studied so-called medical malls. Running healthcare facilities in malls is often far cheaper than doing so in hospitals, he added.
Other recent hospital redevelopment deals in shopping malls include the Landmark Mall in Alexandria, Va., where Inova Health System plans to build a $1 billion healthcare campus. In 2020, Brookfield Properties began converting a former Sears store in the Neshaminy Mall in Bensalem, Pa., into a massive medical facility.
A Sears department store was an anchor in the Marketplace Mall in Rochester for more than three decades, until it closed about three years ago. The mall’s owner, Wilmorite, initially considered breaking the space up and leasing it to big-box stores.
Instead, Wilmorite sold it to the university’s medical center for $18.3 million in early 2020. Turning the space into a healthcare facility promised to bring people to the mall during weekdays, when foot traffic is usually lower. The mall was about 30% vacant at the time, and more visitors could help with leasing.
“We saw this as a real shot in the arm,” said Wilmorite’s president Paul Wilmot.
The Medical Center also considered vacant land and an industrial building. It picked the mall in part because converting it would be cheaper and quicker than building from the ground up. By chance, the department store’s column spacing was perfect for a surgery center, said Paul Rubery, chair of the Medical Center’s orthopedics department. The mall’s parking space and proximity to roads and bus lanes were also important.
“Why did the mall owner put this building here? They put it here because it’s an ideal location for access, which is a huge issue in retail,” Dr. Rubery said. “But it’s an even larger issue in healthcare.”
The project’s first phase—converting the Sears-adjacent wing of the mall into administrative and medical offices—already is complete. To turn the former department store itself into an outpatient surgical center, construction crews are removing most of the building but keeping the frame and part of the exterior wall and roof system. They are adding windows to bring in daylight, and new floors and plumbing.
Medical facilities need far more sinks and drains than a typical Sears store, said Scott Hansche, a principal at architecture firm SLAM, which is designing the project with Perkins&Will. The conversion is set to open in late 2022. The Medical Center also is developing a four-story building next to the converted store that it plans to open in 2023.
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