Premise Lease Negotiations

Out of the Shadows: Retail Premises for the Dental Clinic


Ian D. Toms


September 13, 2013

September 13, 2013

Premises location can be used to control the number and type of new patients, which is why more and more practices are being built in high profile retail property. First, many consumers now perceive that oral health is a consumer commodity which should be provided in a retail setting, not a professional service in a medical professional office setting. Secondly, many patients now choose their own healthcare provider based on Google search, treatment price, and visible location instead of referral.

The type of retail development, location within the development, co-tenants, and signage are key location issues.

The idea of a retail development is that the entire tenant community within the development is deliberately chosen by the landlord to create a synergistic effect; a certain tenant draws a customer who notices and shops at an adjacent tenant and vice versa. You need to choose the development type and tenant mix to ositively affect your practice by associating with other tenants drawing the type of person you want as a patient. For example LuLu Lemon and Value Village both draw clothing shoppers; which would you like to be beside?

Enclosed regional malls such as Scarborough Town Centre and Oshawa Town Centre lease space to high end retail chains such as Lulu Lemon, Le Chateau, the Gap, and Blacks, and have large food courts. These malls draw very high numbers of retail shoppers from a 50 km radius. Shoppers generally attend the mall infrequently and/or for a specific purpose. If you find space, a 1500 square foot space could cost $15,000 plus per month. Potential new patient exposure is limited to pedestrian traffic within the mall; tenants are invisible to the public roads.

Anchored shopping centres offer smaller retail bays adjacent to an “anchor” such as a Home Depot, Walmart, Canadian Tire, or a Sobeys for example. The idea is that the large anchor will draw customers, who may also shop at the ancillary retail tenants. A 1500 square foot space is likely to cost $8,000 per month. Typical ancillary tenants are Royal Bank, Harveys, LCBO, Pet Value, Tim Hortons and McDonalds. These developments offer visibility to both public roads and adjacent tenants. A challenge is that customers attend these developments to buy something specific from the anchor tenant such as a load of lumber, which means that the bulk of the people seeing your practice fall into a specific demographic which may not match your vision.

Big box developments assemble medium size retailers in the 5000 – 15000 square foot range including Shoppers Drug Mart, Boston Pizza, Montanas, and the Beer Store for example. Leases are aggressive and impaired. Big box tenants are arranged as a shopping community within the development on a series of interior roads. Tenants face limited visibility from public roads and must rely on being seen by customers attending other specific tenants. For a 1500 square foot bay, count on paying at least $8,000 per month.

Strip plazas are a linear assembly of smaller mixed retailers in the 800 – 3000 square foot range, typically parallel to a public road. Typically, 1500 square feet will cost $6,000 per month. Success in this type of development relies on synergy of co-tenants and signage to drive customer activity.The tenants immediately adjacent to your location and visibility to the public road are critical.

So where do you want to be? Use common sense. Choose a location within a development that will give you the highest new patient traffic flow of the type of patient you want, now and throughout the next 20 years – with a rent that makes sense.

First, choose a development with a large grocery store anchor since that type of use is very unlikely to leave the mall, and regardless of economic conditions, people have to eat. These stores attract very large numbers of potential patients from the area directly around the development. Often it’s the family decision maker who also does the grocery shopping so that person influences the decision of several others. Locate in the line of site of the grocery store customers.

Secondly, family physician walk-in clinics and large  drug stores serve large numbers of customers who have health related issues on their mind when they attend the development, and are therefore more likely to notice your clinic. Locate in the line of site of a clinic and/or drug store customers.

Third, position your location within the development to be in the field of vision of customers who attend the other tenants, AND to maximize visibility to the public road.

Finally, choose a location where rent is less than 7% of your expected gross production 2 – 3 years after opening. PA