Site-specific demands key to medical property success

The Australian health sector features robust growth indicators on the back of an ageing population, longer life-expectancy and the overall increase in demand for healthcare services and healthcare employment. This is supported with large government healthcare funding, and all of these factors are leading to an increase in demand for medical-based property.

While medical centres make an attractive investment proposition, site specific factors that will give the practice the best chance of succeeding are vital in property selection.

Such factors include accessibility, parking, exposure, council zoning and requirements, location of competitors and location of referral partners.

Different types of health care practices will have different site requirements so assessing the target practitioners will be crucial for investors when selecting a site.

When assessing the suitability of a site for the many different types of medical practices, there are two major considerations, the volume of clients the practice would regularly service and the reliance of the practice on its referral partners.

By categorising the different health care services using these two factors, investors can better understand exactly what they, and their tenants, require from a property so a site can be selected that delivers optimised returns.

Below is an explanation of these two factors and how they influence the different types of tenants in medical centres.

High volume of clients, high reliance on referrals

These services rely heavily on referrals from general practitioners to generate the high volume of clientele. They provide a service that is less specialised and less niche than other medical professions offering greater competition from service providers. Services in this bracket include pathology, radiology and pharmacy and often require commercial grade property that is highly accessible to patients. The property should be located nearby a GP or hospital, or within a medical centre where the GP (or group of GPs) is the anchoring tenant. Parking is also important as these outlets are able to deal with a large number of clients at once. Exposure is key with many of these uses (primarily radiology and pharmacy practices) located on major highways and prominent corners with visual signage, in order to increase customer catchments.

Low volume of clients, low reliance on referrals

Healthcare practices in this category are smaller, more specialised and rely more on the typical needs of their immediate neighbourhood or district rather than patient referrals. Signage and exposure is therefore an important factor in bringing in clients. They include services like physiotherapy, chiropractic and dentistry and will often be located in the heart of the suburb nearby traditional residential, schools or minor activity centres. Converting old residential properties to medical space may be a viable option for these types of practices as parking is less important and the majority of their clients will be residents of the same area.

Low volume of clients, high reliance on referrals

Medical practices that are highly specialised fall into this category. They tend to operate in a niche market, performing complex procedures in fields such as specialised surgery, oncology, occupational therapy and ENT specialists. Virtually all of their clients will be generated through direct referrals and therefore these practices require property very close to, or within major medical centres or hospitals. The services they provide are highly technical and of high quality and thus the spaces they occupy should feature high specification fit outs with frequent refurbishments. A large street presence is not essential due to the direct referral and, as such, an upper-floor locality away from direct street frontage can be suitable, for instance.

High volume of clients, low reliance on referrals

This category of healthcare will be more suited to a traditional commercial space with high levels of exposure and accessibility. General practitioners, veterinary, optometry and massage therapy are examples in this category, relying less heavily on referrals, instead generating most of their business through exposure and advertising. It is typical for these practices to be a part of or attached to major activity centres because they require a location that is easily accessed via personal or public transport, with frequent foot traffic also a requirement.

Although medical centres can make robust investments, it’s important to understand the site specifics demands of different medical practitioners to optimise commercial property assets.

Failing to do so can result in a higher turnover of tenants, resulting in lower rental returns.