Date: April 17, 2015
Urban Practices, a Follow-Up – Podcast
Listen to the Podcast here:
Session 17: Urban Practices, a Follow-Up
By Scott McDonald
Hello, this is Scott McDonald and welcome to the Perfect Place to Practice Podcast.
In a previous podcast, I talked about the rise of the urban areas. The apartment is turning into the primary place for young families to locate. In the larger cities in the U.S., it is especially dangerous to underplay in the importance of this shift, especially for young doctors considering sites in which to practice. As I have repeatedly reported, renters are the majority in big U.S. cities. Demographers have tracked the 11 largest metro cities in 2013 and found a big upswing in renters. Granted, owning a home in large, urban areas like New York, San Francisco, and Washington, D.C. has always been expensive. But in Atlanta, Dallas, Houston, and most of the other dynamic cities on hears about, home ownership in no longer a priority. And that is the primary news of this trend: younger families are not looking to own. And there are some big impacts upon practices of all types when this occurs.
- Renters are not moving into single family homes like they once were. They are choosing apartments. Apartment dwellers have less room (obviously) than home dwellers, particularly those in the suburbs.
- The implication is that they will purchase less “stuff” to fill their apartment because there is not as much room. When people buy less stuff, the people who make, ship, and sell “stuff” suffer financially. The economy goes down in the long-run. The implication is that the financial impact upon an urban area with fewer “families,” particularly families with children, spells trouble ahead. Apartment living is considered the “smart think to do right now” because so many people are concerned with the economy and the overall job market. Whatever numbers the government or Wall Street is putting out there, the reason that apartments are more popular than ever is because people are still not confident about the future.
- They will also tend to have fewer people per household. In fact, most doctors think about family size only in the abstract. But the fact is that apartment dwellers will tend to increase the population density but they do not increase the population per household. In the end, there are going to be fewer patients overall to treat when this occurs. What we note in our studies of urban areas is that doctors are tending to treat a more narrow demographic than ever before. The variety of incomes and ages is reduced. This means may practices are seeing a more homogenous subset of the general population.
- They are also not staying “put” the same degree they once did. They are moving more often, with the most common reason that they are pursuing a job. When a company announced that they were moving or that they were opening a new office which could mean opportunity, a large percentage of the employee base mentioned that they were reluctant to go. They had a house. Their kids were in school. They had a network of friends and family they didn’t want to leave. But with no mortgage, fewer or no kids, and a less established social network, these apartment dwellers are in a better position to be mobile. Doctors have long known the benefits of a firmly established patient base. But that base may be more illusion in the urban areas in America. And thus, transience is much more common, particularly in the middle and upper-middle class households doctors like so much.
- One of the biggest implications of a younger, renting, and transient population is that doctors need to make sure that they are able to keep their service in front of the public more than ever before. Many doctors still remember a time in which advertising was unnecessary because word-of-mouth could be depended upon to spread the word. With renters with a small or non-existent social network, the only way for them to find a doctor was to depend upon mediated messaging, in particular, this would include advertising. It is likely that without some outside mechanism to make sure potential patients knew about you, the new patient count would decline. This challenge can be reduced to understanding branding and considerations of media mix. In an urban area, this is neither cheap not simple.
- Competition considerations are evolving. When many older doctors considered where to put a practice, among their first considerations was whether or not there would be many competitors. There is a belief that persists today that the further from a competing practice one could find and office, the better it would be. Urban practice sites do not afford that luxury. In fact, the doctor may find that competing practices are often very nearby. This is not inherently bad because a greater population density (meaning the number of people who live per unit of geography) also means more people who are “within play.” Doctors must calm themselves just because they walk past a competing practice every day on the way to work. The answer is to brand the practice so that even if similar services are offered, there still seems to be differences between offices that would attract a particular patient to seek care from your office. The additional challenge is that too few doctors have ever considered what their brand might be. In a future episode, we will discuss professional practice branding.
In conclusion, data indicates that these urban areas are going to continue to grow in popularity, that the job market in these locations will continue to increase their viability, and that with the potential of rising interest rates, home ownership is going to be weak. This accounts for the increase in rents in almost every one of the top 11 metropolitan markets in America. For our part, this is a trend that will continue at least for the next five years and may take as long as a decade to reverse itself.