By: Gary D. Rappaport, Founder and CEO of Rappaport, McLean, Va
Medical, health, wellness, fitness, and educational uses have become ubiquitous across the suburban shopping center landscape from coast to coast, bringing repeat visits and longer stays.
Some say the most important thing in our business is “location, location, location.” Perhaps so for retailers, but for me, it’s “leasing, leasing, leasing.” Nothing affects the success of a shopping center and the tenants within it more than having the right combination of retailers that together attract customers for each other.
Leasing is the root of the income in a shopping center, and the income is what generates the returns for the investors in the project. Likewise, the value of the asset is directly linked to the income.
I’ll start off by saying that there is no optimum tenant mix. Shopping centers are like snowflakes—no two are exactly alike—and every location has a different allure for retailers. You just have to use your knowledge and skills to seek out retailers that are interested in leasing space at your shopping center and select the best combination of tenants that can ultimately draw the most traffic into the center and generate the highest retail sales.
How do you research tenants in a large shopping center and see what is available in your market?
Visit the center for one. Go online to look up the center and obtain the store directory. Another, much easier method is to check out the vast dataset from Directory of Major Malls @ ShoppingCenters.com where you’ll find updated, comprehensive data with landlord contacts, complete tenant lists along with mobile analytics, segmentation, graphs & tables of retail chain and tenant-mix metrics, and stats by center for major open-air community centers, power centers and regional malls, lifestyle/mixed-use centers and others. In planning your tenant mix, research is key.
The shopping centers that I own are typically grocery-anchored neighborhood centers, community centers and power centers, but my company, RAPPAPORT manages and leases many other retail components of multi-tenant, single tenant, and mixed-use properties for other landlords. We also represent more than 75 tenants for leasing in our markets located in Maryland, Virginia and Washington, D.C. For every property, we seek the right mix of retail that sparks cross-shopping and brings the most value to the asset.
Medtail & Edutail — two service-oriented uses becoming critical to enhancing the retail experience
That can be many types of retailers, restaurants, and other complementary non-retail uses, but for this article, we’ll concentrate on two service-oriented uses that in the 2020s are becoming critical to enhancing the retail experience. These uses bring customers who stay longer at the center, visit other stores and return to the center over and over again. I consider these to be internet-proof tenants are: 1) Medical, fitness, health, and wellness, which we’ll call Medtail, a mishmash of medical and retail, and 2) Edutail, which refers to educational concepts in a retail environment.
Medical, Fitness, Health and Wellness
Medical uses in open-air shopping centers used to include only the basic services, such as a dentist, an orthodontist, a chiropractor, or an urgent care. Nowadays, it has become much more than that, which has sparked new meaning to community centers and brings customers back more frequently.
The rise of Medtail comes as tenants take advantage of reasonable rents and desirable high-traffic shopping center storefronts, prompting increased foot traffic for all the tenants in the center. Medical-related uses are becoming an increasingly important source of tenants for retail landlords seeking to backfill second-generation space. About one-fifth of leased medical space was located in retail buildings in the early 2020s, up from 16 percent in 2010, according to data from the CoStar Group.
As of today, within the RAPPAPORT portfolio, we have more than 30 medical concepts and we are seeking to bring in more. These uses include pediatrics, urgent care facilities, dental (general and orthodontics), chiropractic, physical therapy, and sports rehab.
Health and wellness are not just trends, they are a way of life for most people today. People of all ages—from boomers to Gen Zers—are more health-conscious than ever before, making fitness tenants large and small a desirable use at many community centers.
There were more than 100,000 gym, health and fitness clubs in the United States in the early 2020s, although they were hit hard during the pandemic at the beginning of the decade but they immediately began to recover as Covid began waning off. Many include the most popular large gyms, such as LA Fitness with more than 700 clubs across the United States and Canada), Life Time, 24 Hour Fitness USA, Equinox, and Gold’s Gym.
Health and wellness are not just trends, they are a way of life for most people today
We strive to lease to the most pertinent fitness tenant for each of our centers and have had success in doing so. Examples include Orangetheory Fitness at Centrewood Plaza in Centreville, Va., Georgetown Shops in Washington, D.C., and Springfield Plaza in Springfield, Va. We brought in CrossFit Durable to Dominion Valley Market Square in Haymarket, Va., Solidcore to Avec on H Street in Washington, D.C., Burn Body Boot Camp to Fair Lakes Promenade in Fairfax, Va., and Pure Barre to Vienna Shopping Center in Vienna, Va., Central Park in Fredericksburg, Va., and Potomac Festival I in Woodbridge, Va.
Our massage tenants include Hand & Stone Massage and Facial at Davis Ford Crossing in Manassas, Va., Massage Envy at Tackett’s Mill in Lake Ridge, Va., Towers Shopping Center in Roanoke, Va. and Village at Leesburg in Leesburg, Va. At Vienna Shopping Center, there’s an Elements Therapeutic Massage and a LaVida Massage at Central Park.
Educational Concepts
Educational concepts are proliferating throughout the shopping center industry in the 2020s at marketplaces of all types and sizes, something not as prevalent in the 2010s. These uses bring parents to the shopping center, who often cross-shop at other stores while waiting to pick up their kids from the educational tenant in the center.
One example is Mathnasium, a math-tutoring franchise with 900 locations is aggressively looking for qualified franchisees to add hundreds more across the United States. Another great educational use is Kumon, with more than 1,500 franchises in the United States, and nearly 25,000 more outside the country, according to Entrepreneur.com. These educational uses gravitate to upscale neighborhoods where parents strive to have their children’s academic performance rise to the top of their class in school.
Generally, affluent parents drive their kids to special activities after school. On top of trips to sports practices and games or music lessons, they are also headed to their local after-school tutoring center. In many cases, these children come from excellent schools, where they are typically doing well but their parents want them to excel.
Educational concept tenants are becoming more common throughout the shopping center industry
Recognizing this trend, RAPPAPORT has been leasing space to unique and very valuable tenants such as Mathnasium at Dillingham Square in Lake Ridge, Va., Russian Math School at Worldgate Centre in Herndon, Va., C-2 Education at Potomac Promenade in Potomac Md., and Cameron Chase Village Center in Ashburn, Va. Additionally there’s Kumon Math and Reading Centers at Davis Ford Crossing, Potomac Festival I, Potomac Promenade, Bristow Center, Brockbridge and Clock Tower Center. Another unique concept is a technology educational concept called Code Ninjas with locations at our properties; Bull Run Plaza and the Shoppes at Summit Centre.
Swim schools are also in high demand at neighborhood and community shopping centers because they take over vacant big-box spaces and offer families easy access to a vitally important life skill, which can’t be outsourced or purchased online. While swim schools were once rare in shopping centers and the few there were mostly locally owned and operated, they are now regional and even national in scope, with such franchise names as Big Blue Swim School and Goldfish Swim School. Regional players, such as Kids First Swim Schools and American Swim Academy are also proliferating.
As big-box spaces have become less attractive for retailers, some swim school operators are seeking the space, as it has large pools to fill. With an average size starting at 10,000 sq. ft., for example, Big Blue Swim School is looking for a large footprint.
One important consideration is that swim schools attract parents, who often go shopping while their kids are learning to swim. They also draw traffic at non-peak hours. Instead of during the lunch hour or during the end-of-week rush, swim schools are typically busier at the front end of the week and in the mornings and evenings. Those times tend to be less busy for shopping centers. According to Big Blue’s market research, most U.S. parents have at least two kids about 36 months apart, thereby accommodating parents to schedule a couple of visits a week where one child is learning to swim while the other is progressing in their swimming activities.
To capitalize on that trend, the RAPPAPORT leasing team has brought Goldfish to Dillingham Square in Lake Ridge, Va., and Alexandria Commons in Alexandria, Va. We have a Kids First swim school at Festival at Bel Air in Bel Air, Md., and Hilltop Plaza in Bowie, Md. In the Washington, D.C. market, we brought a SwimKids to Potomac Festival I , a Big Blue to Springfield Plaza, a Safe Splash to Town Center at Sterling, and a Little Fish to Central Park in Fredericksburg, Va.
This article is not meant to give you an exhaustive list of potential tenants but rather a general guidance to let you know that your choices for adding “Medtail” and “Edutail” to your shopping center are numerous. You just need to do the research to find the best tenants to go after.
This contributed piece is an adapted excerpt from Mr. Rappaport’s upcoming book; “Investing in Retail Properties, 3rd Edition: A Guide to Structuring Partnerships for Sharing Capital Appreciation and Cash Flow”, published by Forbes Books and available September 19, 2023. Advanced copies can be preordered from Amazon, Barnes & Noble, Books-A-Million, IndieBound, and Walmart. Mr. Rappaport has earmarked all royalties for the ICSC Foundation to support scholarships, internships and other programs that prepare future leaders for the industry. For further information, visit: GaryRappaport.com.
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Gary D. Rappaport, CRRP, CRX, CMD, CSM, CLS, CDP is chief executive officer of RAPPAPORT, a retail real estate company he founded in 1984. RAPPAPORT stands among the shopping center industry’s preeminent private owners and operators of open-air shopping centers providing leasing, tenant representation, management and development services for more than 15 million square feet of retail space throughout the mid-Atlantic region. Mr. Rappaport is a former ICSC chairman. He’s authored three editions of Investing in Retail Properties, which explains how to structure real estate partnerships for sharing capital appreciation and cash flow that has been used since 2011 as a guide by other commercial real estate entrepreneurs. Mr. Rappaport is a guest lecturer and regularly teaches classes at several universities, such as the University of Michigan, Syracuse, Johns Hopkins, and Georgetown.
