Prime Real Estate Equals Premium Profits

Traditional HME businesses are usually hidden within commercial areas or industrial parks where they benefit from paying low warehouse rental rates. When these same HMEs transition from a warehouse to a showroom, often they do not benefit from impulse customers who happen to stop by while shopping at adjacent retailers. They also must spend more money in advertising to motivate consumers to make a special trip to their single-destination location. In general, these supposed retail HME businesses are usually money-losing propositions.

Identifying Ideal Retail Locations

There are two retail scenarios for HME businesses. The first, which is more traditional for Medicare-based businesses, is to locate within a medical community such as a medical office building, hospital lobby or campus, medical mall or neighborhood of physician offices. These locations keep the hours of local doctors who generate the majority of their referrals, usually 9 a.m.-5 p.m., Monday-Friday. The other scenario is with pure retail strip centers, shopping centers or busy retail thoroughfares. These are true retail HMEs without Medicare or Medicaid. They are in highly visible areas that have high daily traffic counts and are easily accessible. These locations keep retail hours: 10 a.m.-6 or 7 p.m., Monday-Saturday. These prime locations are usually near a chain drugstores or grocery/mass merchandiser chains with pharmacies, because these chains have already researched traffic count, visibility and accessibility. The issue in retail when identifying prime locations is to not create a separate destination. When a retail HME is close to other retail businesses, they benefit from consumers who are already there.

Don’t Forget Demographics

By identifying the ideal demographics, a retail HME can target other retail chains that appeal to those same demographics. Whereas HME businesses traditionally catered to seniors who were the customers and end users, in retail HMEs today seniors are still the end users but no long-er the primary customers. Most retail HMEs appeal to female baby boomers who are also family caregivers. The largest crossover from a retail business to an HME is from retail-chain pharmacies. It’s estimated that 10 to 20 percent of their 250-350 script customers per day need home health care products.

The Cost of Retail

Due to the low cost of rent in commercial locations that are less than $1 per foot per month, existing HME businesses are reluctant to move. Retail space does cost more than industrial or commercial space, but the silver lining has been the impact of the recent recession. The average strip mall space rate has dropped by half to $1.60 to $2 per square foot per month. However, these prices are usually only available on a minimum three-year lease, and are often offered in conjunction with one or two months free rent for build-out and all or part of the tenant improvement (TI) build-out costs as well. For HMEs which locate in retail centers that include “triple net” rates, the affordable maximum is usually $2.50 per square foot per month. Plan accordingly by only using your retail location for selling to your highest return per square foot which derives from retail sales, not warehouse space. Retail activities include a showroom for floor display, window displays and a customer service area. For all non-retail functions (rental equipment, warehousing and delivery) use a garage, warehouse or other commercial-priced location.

Other Considerations for Retail Space

1. Is your sign visible from the street? Can you place a marquee sign curbside?
2. Do you have “medial equipment,” “home care products,” “home care store,” or some other variation of HME in large, easy-to-read letters in your tag line?
3. Do you have HME graphics, photographs, window film or actual products on the front of your building to instantly show what products you sell?
4. Do you have enough parking spaces? Do you have a handicap parking space adjacent to your door?
5. Do you have automatic front doors or at least an extra-wide entry door?
6. Do you use your front windows for display? Do you need risers for products to be visible? Do you need track lighting to make the products more visible from the outside?