Doctors shop for space, move to big box

Needing more space is a common side effect of a growing practice, and Medical Consultants PC, a 45-physician multispecialty group in Muncie, Ind., was no different. The group's two locations were cramped, making it difficult for physicians and staff members to operate efficiently.

But Muncie, a city of about 67,000 people, offered few options for large-scale office space. A little creativity and nontraditional thinking, however, helped the physicians find the space they were seeking.

Now, some of the physicians practice where they used to shop, having converted a vacant grocery store into a spacious new office.

The building, with about 33,000 square feet of usable space, is now home to several related specialties, with enough extra room for the group to develop an endoscopy center.

Patients who visit the new Medical Consultants office won't mistake the waiting room for the meat department or bread aisle. The project's $5 million total cost included purchasing the building and surrounding property, stripping the building down to its shell and rebuilding.

"We looked around town for space, but if you wanted to be near the hospital, you would end up having to buy houses and tear them down," said Leonard Zeabart, MD, a gastroenterologist and president of Medical Consultants. "This location has proven to be wonderful. It's kind of like buying a warehouse."

The physicians took advantage of a situation that real estate experts said is common in many communities across the country. As retail grocers continue to grow, buildings that once used to be considered large are now being left vacant, either because a smaller independent store was squeezed out of the market or a chain decided to expand in a new, larger location.

That means that if the timing is right and a group -- or several groups working together -- can make it work financially, a vacant grocery store or retail space could be an office option.

"If doctors want to go off a hospital campus and they're looking for a convenient location with visibility and easy access at a reasonable cost, a smaller grocer isn't a bad idea," said Owen Rouse, senior vice president of Manekin LLC, a full-service real estate company based in Columbia, Md.

Markets differ across the country, of course. While some mature markets might already have seen the evolution of grocery stores, smaller communities or newer suburbs still might be in the throes of competition between retail giants and smaller stores.

It doesn't always have to be a larger chain expanding and leaving a trail of failed businesses in its wake, either, brokers said.

"There are plenty of Kmart stores available now," said Julie Bering, a commercial real estate broker with ADM Commercial in Muncie, the company that represented Medical Consultants. "The facilities are nice big boxes that people can remodel into whatever they want."

Because of its open-air nature and few rooms, purchasing a supermarket is like starting a new construction project with the exterior already completed, real estate experts said.

Many different types of users, from bowling alleys to churches, have adapted grocery store shells to their specific needs, real estate agents said. It might not be as common for physician groups to move into this type of space because of its sheer size, but it does happen, agents added.

Medical Consultants isn't even the first group of physicians in Muncie to convert a grocery store; a group of orthopedic surgeons transformed a vacant space into an outpatient surgery center recently.

"It turns out this is not necessarily unheard of," Dr. Zeabart said.

Maybe not rare, but not cheap, either

It was, however, a costly endeavor, especially when it came to adding the necessary utility lines for a physician's office that a grocery store lacks. A disadvantage to a retail store is that it lacks the plumbing and electricity that an office building with many interior rooms needs, said Bruce Krider, president of American Health Care Appraisal LLC, a firm based in San Marcos, Calif.

When Medical Consultants realized the extent of renovation work that would be necessary to convert the store, "we were about $200,000 or $300,000 away from just taking a bulldozer to it and starting over," said Wayne Winney, chief operating officer of the group.

The price was relatively small, however, considering the benefits the group has earned as a result of the purchase. The new location not only satisfies clinical needs, but it also offers enough space to house the billing office and store medical records. The doctors got a good deal on the property as well.

"We tripled our space, but we didn't triple our costs," Winney said. "We did it at a nice time, too, when the interest rates were low."

Even with renovation costs, buying the shell of a grocery is likely to be cheaper than moving into a new suite in a medical office building, real estate agents said. Prices may be lower because the property has sat vacant for a while, and potential buyers are scarce.

The building Medical Consultants purchased had been empty for a few years after a larger grocery chain bought out its competition and picked up its lease. When the doctors bought the building, they inherited that lease, and they negotiated rent for one year to let the business out of its remaining two years. They used the extra revenue to help pay for additional renovation costs, Dr. Zeabart said.

Since the move, business has been good as well, thanks to the interest the group generated in the old building. A recent open house drew 450 people, Winney said -- not the number you would expect at a typical new office.

"This move has been a big positive for us," Dr. Zeabart said. "We got good press from the fact that we took what had the potential to become an eyesore and made it into something the community has been positive about."