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June 23, 2018
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Medical Users May Resuscitate Long Dead Retail Big Box Space in the Inland Empire

12/28/17

This report was provided to us by CBRE and is based on research conducted by the global real estate services firm.

We’ve all heard the adage “if the shoe fits, wear it.” When we look at the Inland Empire’s (IE) large supply of vacant retail Big Box space, it seems the best fit for this type of commercial space is yet another large retailer. This thinking has proven troublesome for some landlords post-recession, with many opting to divide large empty boxes into smaller units for multiple tenants when a single suitably large tenant cannot be found. This model has been immensely successful in the IE for the past few years, but there is another occupier outside the retail sphere that is quickly gaining traction here and across the country: Medical.

With the IE’s population increasing at a steady rate of 1% annually, demand in the health services sector grew by 4% annually, and medical office users leased nearly 158k sf. on average each year in the IE. Though there is no shortage of vacant office space in the area, the proximity of many empty big box spaces to dense neighborhood populations creates an enticing opportunity. Landlords have been happy to accommodate as well, mostly due to medical users’ good credit standing.

There are, however, potential drawbacks. Owners hoping to inject new life into their centers may find challenges with medical occupiers. Lack of synergy with neighboring retailers could draw potential foot-traffic elsewhere, or at worst, deter other shops from moving in. Careful planning will be critical to ensuring the lifeblood of the center continues to flow despite the absence of a major retail anchor.

Some office users such as call centers, charter and trade schools have also found success by leasing former big box space in the IE. Even last-mile e-commerce could be a potential occupier in the future.

Big box space in the IE is poised to become the Swiss army knife of commercial real estate in the very near future. At least for now, it depends on landlords’ willingness to see the doctor, or end up pulling the plug.





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