Quick Summary:

The outlook for hospital-oriented development appears positive. Hospitals draw steady traffic in good times and bad, and that traffic can support the medical offices, shops, and "medtail" businesses (retail storefronts offering medical goods and services) around them. For nearby retail, medical tenants often bring long leases and frequent visits. And with new medical outpatient construction forecast to reach its lowest level in over a decade in 2026, properties near hospital campuses may be well positioned going forward.

Why Are Hospitals Considered Stable Economic Anchors?

Hospitals keep the lights on around the clock. That simple fact shapes the real estate around them.

In 2023, U.S. hospitals directly employed 6.6 million people and helped fuel $4.8 trillion in total economic activity, according to the American Hospital Association. Every shift change, outpatient appointment, and family visit adds to a steady base of daily traffic.

Because people need care regardless of the economy, demand for this space has historically been less sensitive to economic cycles than most property types and therefore a core defensive asset.

In retail, the old rule is that anchors make the center. Hospitals work much the same way. Like a shopping center, a hospital campus can become a destination, and the traffic it generates can spark additional development nearby, including retail and housing.

How Do Hospitals Drive Mixed-Use Development?

For more than a decade, mixed-use planning has rested on the live-work-play model, where housing, offices, and entertainment feed one another. Now a fourth pillar is joining the mix. Live-work-play is becoming live-work-play-health. Some of these districts evolve organically around existing hospitals. Others are designed from the ground up with medical uses built in.

Medical uses that pair naturally with retail, residential, and office include:

• Hospitals

• Outpatient services such as surgery centers, urgent care, physical therapy, dialysis, imaging, and labs

• Medical equipment and products ranging from specialty shoes to wheelchairs

• Fitness and wellness services, including yoga and massage

Demand for these services is rising alongside an aging population. The U.S. population age 65 and older rose by 3.1% to 61.2 million between 2023 and 2024, according to the U.S. Census Bureau. More older adults generally means more appointments, prescriptions, and therapy visits, and CBRE cites an aging U.S. population as a driver of medical space demand. Putting these services close together offers convenience that consumers value, and that convenience can feed a cycle of demand driving demand.

The spread of medical services into retail storefronts has its own name: medtail. Medtail refers to healthcare delivered in a retail setting, such as urgent care centers, imaging centers, and physical therapy clinics in shopping centers and strip centers.

How Do Retail and Medtail Properties Near Hospitals Perform?

Retail near hospitals tends to benefit from two things most shopping centers want: frequent visits and tenants that stay put. The relationship also runs both ways. Medical tenants can strengthen retail centers, and busy retail can strengthen medical buildings because of added foot traffic and visibility both ways.

Medical buildings near busy retail may lease better

CBRE research suggests that MOBs near high-traffic retail corridors and high-income areas could realize higher rents and occupancy than comparable buildings elsewhere. Tight supply may also push healthcare users outward. With few new medical buildings coming online, CBRE expects the shortage could push more occupiers into existing office and retail space. For retail landlords, that may mean a deeper pool of potential tenants for storefronts that already exist.

Why retail landlords court medical tenants

Medical tenants tend to stay. Plain and simple. Once a clinic installs specialized equipment and builds a local patient base, moving becomes expensive. Medtail leases often involve 10- to 15-year commitments. Many of these tenants are affiliated with health systems or backed by institutional capital, which can enhance the credit profile of an entire shopping center.

These are also visits that cannot happen online. JLL found that medical uses that cannot be replaced by telehealth, and that patients use frequently, such as physical therapists, dentists, and optometrists, have outnumbered other types of medtail move-ins. Meanwhile, low vacancy in most retail markets has pushed up demand, and rents, for medtail space.

Steady visits that can spill over to neighbors

A medical appointment rarely happens in isolation. If patients have a wait, they may grab a meal or run an errand on site. Avison Young, citing ICSC, reports a close link between medtail and visits to other tenants in the same shopping center, and notes that medical users can generate a spillover effect that boosts sales across co-tenants. Among retail types, pharmacies are most likely to benefit from a medtail neighbor.

Around a hospital campus, that base of visitors is broader. It includes employees on every shift, patients, and visiting families.

What This Means for Investors

Hospitals generate demand that does not wait for the economy. The retail and medical properties around them may benefit from that steady base, particularly where needs-based anchors and medical tenants share the same address. Supply, tenant quality, and local healthcare dynamics still matter, so outcomes can vary by property and market. As care keeps moving closer to where people live, the line between a doctor's visit and a trip to the neighborhood center may keep getting thinner.