When a unit comes up for lease, most owners take the best offer from whoever calls. But the type of tenant you choose shapes your property for years: how long the unit stays occupied, how much traffic the plaza draws, how lenders underwrite it, and what a buyer will pay for it. Healthcare tenants have become a large part of neighbourhood retail and suburban office leasing for good reasons, but they are not the right answer for every unit. Here is how to weigh the two.
Duration and Stickiness
Medical tenants tend to stay put. A clinic invests heavily in its premises: exam rooms, plumbing, specialized electrical, and accessible layouts. Just as important, patients associate a practice with an address, and referral patterns form around it. Moving means paying for a new build-out and risking the loss of patients who do not follow.
That combination makes many healthcare tenants reluctant to relocate, and it often shows up as renewals at the end of a term. Retail tenants, by contrast, can be more mobile. Their fit-outs are often lighter, and their customers may follow the brand rather than the location.
Build-Out Investment as Retention
The same build-out that makes medical tenancy expensive to start is part of what keeps it in place. When a tenant has put significant capital into a space, walking away means writing off that investment. For the landlord, the tenant's own capital in the premises works as a retention tool. It is one reason landlords are often willing to contribute to a medical build-out, provided the investment is protected with the right lease terms.
Needs-Based Traffic and Co-Tenancy
People visit doctors, dentists, pharmacies, and physiotherapists because they need to, not because they feel like shopping. That needs-based traffic tends to be steady through the week and throughout the year. It also benefits neighbouring tenants: a patient leaving an appointment may pick up groceries, grab a coffee, or fill a prescription on the way out.
The strongest pairing is a pharmacy near physicians. Prescribers generate prescriptions, and a pharmacy close by captures a share of them. The clinic, in turn, benefits from offering patients one convenient stop. Adding allied health (physiotherapy, dental, optometry, lab collection) builds a cluster that reinforces itself, where each tenant sends traffic to the others.
E-Commerce Resistance
Most clinical services have to be delivered in person. A physical exam, dental cleaning, blood draw, or physiotherapy session cannot be shipped to a doorstep. Virtual care has taken some appointments online, but a large share of healthcare still requires a physical location. Many categories of retail, on the other hand, compete directly with online shopping. For owners worried about the long-term demand for their space, this difference is significant.
The Risks
Medical tenancy is not without downsides. Before committing a unit to a clinic, consider:
- Heavier build-out. Medical fit-outs cost more, and landlords are often asked to contribute. Protect that contribution with covenant review, guarantees, and clawback provisions.
- Parking load. Clinics often generate more vehicle trips than retail of the same size, and many zoning bylaws require more parking for medical use. A large clinic can strain the lot for everyone else.
- Specialized re-leasing. A heavily customized space, such as a dental office or imaging suite, may appeal mostly to similar tenants if the original one leaves. That can be an asset (second-generation medical space) or a limitation, depending on local demand.
- Practice sale and assignment. Physicians and dentists eventually sell or retire. The lease needs a clear assignment process so that a sale to a qualified buyer keeps the unit occupied, while the landlord retains reasonable approval rights over the new tenant.
How Lenders and Buyers View Medical Tenancy
Many lenders and investors view established healthcare tenancy favourably, largely because of its needs-based demand and tendency toward renewal. Medical office and medically anchored retail have attracted steady interest from private and institutional buyers. That said, no one underwrites a category in the abstract. A lender or buyer will look at the specific tenant's covenant, the remaining term, the renewal options, the lease terms, and how the tenant fits the rest of the property. A plaza with a strong clinic on a long lease is a different proposition from one with a new practice on a short term. If you are considering a sale or refinancing, clean, well-documented medical leases are part of what gives the property its value. Our acquisitions and dispositions team can help you understand how the market is likely to see your asset.
Planning the Tenant Mix
The best answer is rarely all medical or all retail. A well-planned plaza combines the two:
- Anchor with daily-needs tenants that bring regular visits, such as a grocery store, a pharmacy, or a family practice
- Place clinics in units that suit them (ground floor, near parking, with good servicing) and keep prime retail frontage for tenants that benefit from impulse traffic
- Balance parking demand by mixing uses whose busiest hours differ
- Use exclusivity clauses carefully so you protect anchors without blocking complementary tenants
How PRAXIS Helps
PRAXIS Healthcare Real Estate represents landlords, owners, and developers leasing to healthcare tenants across Ontario and Alberta. If we work with both parties on the same deal, it is disclosed in writing upfront and handled as provincial rules require. We help owners decide which units suit medical tenants, plan a tenant mix, and negotiate leases that protect the investment. See our landlord representation service, read our notes on the Toronto and Brantford markets, or reach out to talk about your property.
Frequently asked
Neither is better in every case. Medical tenants often stay longer and draw steady, needs-based visits that are less exposed to online shopping, while retail tenants can add evening and weekend activity and usually need a lighter build-out. The right choice depends on the unit, the parking supply, and the tenant mix you already have.
A clinic invests heavily in its build-out and builds patient relationships tied to a specific address. Relocating means paying for a new fit-out and risking losing patients, so many practices renew rather than move.
The main risks are a heavier and more specialized build-out, higher parking demand, and a smaller pool of replacement tenants if the space is highly customized. There is also the question of what happens to the lease when the practice is sold, which should be addressed in the assignment clause.
Many lenders and investors view established healthcare tenancy favourably because of its needs-based demand and tendency toward renewal. How they assess a specific property still depends on the tenant's covenant, the remaining lease term, the lease terms themselves, and the overall tenant mix.