Hot property

Just because more commercial properties have become available in and near big cities since COVID forced many CBD businesses to close, that doesn’t necessarily mean such sites are where you should locate your healthcare practice. 

Every crisis is also an opportunity, according to the old saying that has been attributed to everyone from Albert Einstein to Winston Churchill. When the pandemic lockdowns forced many CBD businesses to close, it looked like a great opportunity for healthcare practitioners who wanted their own place in the city. Unfortunately, it wasn’t.

“What really happened is that a lot of demand pushed from the CBDs out to the suburbs,” explains Julian Muldoon, director and founding partner of 1Group Property Advisory. “The fact of the matter is that most of the suburbs don't have enough commercial property available to deal with the growth in demand for services within middle ring and outer suburb areas.”

Julian says the CBD commercial property sites that are struggling with vacancies tend not be the ones favoured by smaller medical or dental practices. Even strata offices fared well in the pandemic, as interest rates were low and cash was plentiful.

“Generally, the economy is doing really well,” Julian says. “Businesses still need to have a physical presence. It's very hard to be a 100 per cent virtual business, especially if you're scaling and growing, trying to define a culture, and attract talent. So from that point of view, commercial property remains a linchpin for a business’s location, strategy, and identity.”

Fringe dwellers

With former CBD businesses competing for premium spaces in the city fringe areas, healthcare businesses who wanted a spot close to the city for the convenience of seeing the working population as well as locals, have found themselves being pushed further and further out.

“You are tapping into a higher affluence in those fringe markets,” says Julian. “I'd say most of the opportunity sits in large greenfield areas, which have got significant population growth, and lots of construction happening. But they tend to be, in some cases, lower socio-economic footprints so the viability of say, mixed billing or private billing or more diversified offerings of opt-in type services, tends to be harder.

“The difficulty in more affluent areas closer to town is the old money that tends to hold commercial property doesn't really feel the difficulties of economic downturn. It's not like the residential space where you're geared to 80 per cent or 90 per cent and using negative gearing to help offset costs. Most of the commercial property owners out there are generally sitting on asset with no debt. So while it's frustrating for them, it's not a financial problem when they haven't had any income coming in.”

Your point of difference

The upshot of all this, Julian says, is that it would be unwise to let a commercial property strategy lead the timing of your business strategy. “If you do that, you’re trying to pick the market,” he says, “and I don’t think you’ll ever find a time when high-quality commercial properties are selling cheaply.”

He adds that the property required for healthcare is always hard to obtain because it generally requires a certain footprint, accessibility, age, ease of conversion, and access to parking. “It's always a tough property to find because it's always a more premium property in that particular catchment that you're looking at than the average,” he says.

Much wiser is to let your offering guide your business strategy, then look for something that suits, rather than a particular area. “If you're doing a very general offering that doesn't have a real X factor, then the greenfield option tends to be the best because it's purely based on a ratios analysis that there's a big population without a doctor or a dentist.

“What we're seeing in the fringe areas is a more diversified offering. It might be a health hub, or it might be that there's very specialised unique services for a certain demographic, population catchment, or gender. It’s now more about a deeper competitor analysis that's required to overlay or integrate into the location strategy. Because I think any doctor, dentist or vet will say there's always going to be a competitor near where they set up these days. It's very hard to find an area that's pure, or has no competition, so it's really about what does that competition do and how you differentiate from them.”

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