Dental offices — especially the well-known national brands — are reliable retail tenants, as they are guaranteed to receive a regular stream of customers. The procedures at these offices have to be done in-person, so landlords do not need to worry about decreased traffic in the event of an economic downturn or an uptick of COVID-related concerns. Dental offices also attract a variety of age groups from all demographic backgrounds, ensuring that this tenant category is adaptable to all types of spaces, provided there are adequate parking spots. Dentist brands are even keen to take on vacant spaces in distressed indoor malls, as well as retail spaces in sites off of Main and Main. Space preferences for these nationally known dental brands run the gamut, from affordably priced units in value-driven neighborhood power centers and strip malls, to more upscale-oriented lifestyle centers and retail street-front spots.
Now that COVID-19 fears appear to have subsided in most of the country, these dental brands are ready to expand. Most of these brands operate as dental service organizations (DSOs), which manage the business/expansion operations for independent dentists, many of whom take on the nationally branded name. Others operate as dental partner organizations (DPOs), taking on a co-op role for major decisions, including using capital funds for expansion. Look for Pacific Dental Services, Aspen Dental, MB2 Dental and Tend to increase their national footprint, especially in those regions that are experiencing population growth.
Pacific Dental Services (PDS), a DSO that recently opened its 850th dental office and is currently based in 25 states, expects to open approximately 100 new offices per year over the next three years, starting in 2022. The brand is actively expanding throughout the regions of Dallas/Fort Worth, Denver, Salt Lake City, Boise, Idaho, San Diego, San Bernardino, Calif., Oklahoma City, Orlando, Fla., Las Vegas, Cincinnati, Ohio, and Albuquerque, N.M. Space should be between 2,500 and 3,200 s.f. in a standalone pad or an end cap. All types of sites are considered, including lifestyle centers, power centers, strip centers and neighborhood grocery-anchored centers.
Space should be in high-growth residential communities with a population of at least 60,000 and an average household income of at least $75K, with 30% of the population consisting of children up to age 19. Locations should be experiencing gentrification and have high traffic counts. Co-tenants should attract the female audience, with preferred brands including Target, Walmart, Kohl’s and all major grocery chains. PDS provides support to dentists such as business and administrative services, clinical training, marketing, human resources, accounting, legal help, IT assistance and real estate expansion.
The Aspen Dental DSO continues to expand, expecting to open between 80 and 100 new units per year over the next two to three years. Markets expecting new units include all territories (tertiary, secondary and mid-sized cities) in the West, especially California, Nevada, Colorado, Utah, Wyoming and Montana, as well as the Northeast states of New Jersey, Delaware and Pennsylvania. In addition, the states of Florida, North Carolina and Illinois also expect to see growth. Aspen Dental seeks dental space, either shared or standalone freestanding or end cap, in the 3,500-s.f. range with 50 feet of frontage. Areas preferred are blue collar, middle-income neighborhoods with a high proportion of senior citizens, in regions that do not already have a dentist in the vicinity. Space should be in Class A+ super-regional power centers or strip malls with ample parking and great visibility near busy streets, as well as urban MOB spaces. Sites should have other high-traffic co-tenants, such as Michaels, Costco and Panera Bread. Aspen Dental is known for providing affordable, high-quality dental and denture services in areas with a shortage of dental health professionals.
MB2 Dental, the co-op DPO, is on track to open approximately 65 to 75 new units per year over the next three years. Earlier this year, middle-market private equity firm Charlesbank Capital Partners acquired a majority interest in MB2 Dental, and in September MB2 Dental hired two additional VP of business development employees to continue to fuel new expansion efforts.
Expect Washington, Idaho, Virginia and North Carolina to be targeted for future growth, and for expansion to continue, via affiliated dentist partnerships, in Alabama, New Jersey, Utah, Michigan, Maryland, Ohio and Georgia. The brand will also concentrate on opening more units in the West, especially Arizona, Colorado and Northern California. The general size of the MB2 Dental units are approximately 2,600 to 3,500 s.f., and its affiliated dental brands are found in all types of spaces within growing communities, primarily end caps, inline and standalone spaces in suburban power centers, grocery-anchored neighborhood centers and strip malls, in addition to traditional MOBs. Preferred co-tenants include all high-traffic brands, including Dollar General, Starbucks and McDonald’s. MB2 provides capital and services, including real estate development, to help those dentists interested in expanding their practices.
Tend, a bit of a newcomer on the dental block that opened its first dental studio two years ago in New York City, now has 14 units in both New York and Washington, D.C. New units are expected to open in Boston by the end of the year, as well as offices opening in Arlington, Va., and Atlanta by late 2021/early 2022. Potential sites for new growth include Nashville, Tenn., and San Francisco, and expect the brand to eye other popular metros in the future, such as Austin, Miami, San Diego and Phoenix.
In April, Tend received $125M in Series C funding led by Addition, the New York-based venture capital firm, with additional investors including Zigg Capital, Juxtapose, Redpoint Ventures and GV. Tend plans on opening up to six more units in New York City and will expand into even more upscale urban metros throughout the country. Anticipate Tend to open approximately 10 to 15 new units per year over the next two to three years. Tend prefers end cap spaces in the 3,000-s.f. range on busy urban residential streets in convenient locations, with co-tenants that are popular with the upscale millennial crowd, including Just Salad or T-Mobile. Its dental studios are designed to replicate spa havens that encourage relaxation, and its technology encourages a calming experience.
