Finding a PACE Building When the Market Doesn't Have One
Screen every building in your service area against six pass-or-fail requirements before you fall in love with any of them: permitted use or a viable entitlement path, a contiguous 12,000 to 20,000 square foot floor plate, a van drop-off loop, parking for 40 to 120 staff plus vans, utility service for a commercial kitchen, and capacity for the census in your pro forma. Run the checks in order of what they cost you to find out. Then choose among the two or three buildings that pass.
Nobody is building a PACE center on spec and hoping an operator will come by and take it out (though if any developers or investors ARE interested in that...call me...it feels like there's an untapped opportunity here). Every center I have worked on started as something else: a retail box, an office building, a single-story medical building, dirt. So when your broker sends twenty available buildings in your service area, expect one or two that can become a PACE center, and sometimes none. Plan the search around that.
I have written separately about what a PACE center has to contain and how the participant day drives the plan, and I assume that here. This post covers the search: which screens to run, in what order, so you are not paying for a test fit or a utility study on a building that fails a cheaper check that could have happened weeks before.
Why does the search have to move fast?
Your program combines a licensed clinic, an adult day health center, a rehab gym, a commercial kitchen, and a small transit operation on one floor, for a frail population that mostly arrives by van. That building doesn't exist, so you are searching buildings built for other users and asking whether each one converts inside your timeline and budget. On the California searches I have run, we start with 30 to 60 buildings that fit on size and geography and finish with a 1-3 that are worth a test fit.
The viable set is very small, and it's easy to weed out ones that will never work. You need to screen the whole market quickly and cheaply, and move on a viable building even if it is imperfect. While you study two to three buildings (if you're lucky) carefully, one of them leases to someone else. And your state readiness review and CMS milestones assume a site, so a search that runs six months long shows up in your licensing sequence.
Which screens do you run first?
Order the screens by what they cost you to find out. Free checks first, phone calls second, paid work last, so your diligence budget lands on the one or two buildings that survive.
- Free, from your desk (an afternoon per market). Pull the zoning map and parcel designation. Check parcel size and building footprint. Count the parking stalls in an aerial. Confirm single story, or that the ground floor alone is big enough. Note building age and construction type, which predicts what you will find in the roof, the slab, and the electrical room.
- Cheap, by phone (a week per market). Call the planning department: how does this jurisdiction classify adult day health, and is it permitted by right in this zone or does it need a conditional use permit? Call the utility: what service exists at the address, and what does an upgrade take? Call your broker: how flexible is ownership on a long conversion and a long free rent period?
- Paid, on survivors only ($15K to $50K per building, depending on scope). Test fit against your actual program. A mechanical, electrical, and plumbing walk with your engineer. Phase I environmental. Structural review if you are adding rooftop equipment or cutting the slab. Title and survey once you are in a letter of intent.
Expect step one to do most of the work. Count the parking field in an aerial and in a few minutes you know a building cannot serve 60 staff and 12 vans.
What are the six things that rule a building out?
Treat these as pass or fail. Good rent, a good location, and an enthusiastic landlord do not change them.
1. Permitted use, or an entitlement path you can actually run
In the California jurisdictions I have worked in, planners tend to classify PACE as adult day health plus a medical clinic, and they treat those differently from each other and from retail or office. Some zones permit both by right, some require a conditional use permit for the day health component, and some planners have never processed the use and reason by analogy (i.e. grouping adult day care with child day care). Budget six to twelve months and a public hearing for a conditional use permit.
Get a named planner to tell you the use is approvable in that zone and confirm the timeline fits your program calendar before you spend anything else on the building. Code language ambiguous enough to argue about is schedule risk, and you do not want to find out when you submit for permit that you need a CUP.
2. A usable floor plate
You want a large contiguous single story, or a ground floor big enough to hold the whole participant day. This varies widely by program and state, but general rule of thumb is 12,000 to 20,000 square feet depending on target census. Check column spacing and clear height before square footage. The day room and the rehab gym are the two largest uninterrupted spaces in the building, and a tight column grid means you could have a bunch of columns sitting in the middle of a PT gym you need participants to navigate safely in.
Treat a second floor as a problem for a frail population, elevator or not. Evacuation planning, staff line of sight, and walker and wheelchair traffic on one elevator at a lunch transition all get worse. Two-story buildings work best when the entire participant day sits on the ground floor and administration goes upstairs. It does work on two floors, usually with clinic and admin upstairs, but avoid it if you can.
3. Outdoor circulation for the vans
This requirement rules out more retail buildings than any other. Eight to fifteen vans arrive inside a compressed morning window, unload participants who need time and often a lift, and leave. You need a loop: an entrance, a covered canopy, a place to stage wheelchairs out of the weather, and an exit that does not require backing across a parking aisle.
Retail parking fields were drawn for cars that park and stay. Some sites can be restriped and recurbed to create a loop. Some cannot, because the loop would eat the fire lane, or the drive aisle is the only access to a neighboring tenant's loading dock. Check it with an aerial and a site plan in week one. It is the most expensive thing to discover after you have signed.
4. Parking
A mature center runs 40 to 120 staff who park all day. Add the van fleet, which needs overnight and midday storage, plus vendors and the family members who visit for tours or drive participants themselves. A former retail building usually carries a generous enough ratio. A former medical office may not, and code-required parking for your use is frequently calculated differently than for the prior use, which turns a building that looks adequately parked into one that needs a variance. Run the parking math before you tour.
5. Utilities
A commercial kitchen serving 100 or more meals a day needs gas service or heavy electrical, a grease interceptor, and a hooded exhaust with a roof penetration. A rehab gym, showers, and laundry need water and sewer capacity above what a retail shell typically has. Electrical service sized for a department store is frequently short for a kitchen, a full HVAC load, and clinical equipment together.
Ask the utility what service exists and what an upgrade takes before you ask the architect anything. In my experience a transformer upgrade or a new service drop runs on the utility's schedule, measured in quarters, and your general contractor cannot compress it by adding people.
6. Program capacity
Confirm the building can reach the census your pro forma needs, measured in participants in the center on a given day rather than total enrollment. Day room seating, dining seating in one or two turns, exam room count, restroom fixtures, and the van loop's throughput each cap that number. A building that tops out at 120 participants a day when your model needs 180 is the wrong building at any rent, because you will be opening a second site three years earlier than you planned.
Run the six pass-or-fail checks on every building in the market first, including the ones you do not like. Then argue about the survivors. The checks are physical and regulatory. The things you will want to weigh (location, cost, timing) are operational and financial. I have watched programs get this backwards: someone falls for the location, the team spends two months on it, and then the civil engineer says the drop-off loop cannot be built without taking the fire lane.
How do former retail, office, and medical buildings compare?
Each conversion category comes with a predictable problem. Know which one you are buying so you can price it early.
- Former grocery, drugstore, or big box. Floor plate, parking, and ceiling height are usually right, and a former grocery or drugstore often comes with more electrical service than you need, because refrigeration and freezer cases draw more power than most PACE centers do. Expect the problems to be gas service and kitchen exhaust, sewer capacity and a grease interceptor, HVAC sized for retail rather than a full day of occupants, and a parking field that was not drawn for a van loop. A former department store or big box without refrigeration is the one to check for electrical capacity. Drugstore closures put a category of these on the market, which is why I keep a running list of Rite Aid closure sites worth screening for healthcare conversion.
- Former office. Floor plates are often the right size and the electrical service is decent. Expect parking to be short for a staff-heavy program, kitchen infrastructure to be absent, and a multi-story building with a core sitting in the middle of the space you wanted for the day room.
- Former medical or dialysis. The plumbing is in the slab, the restroom count is closer to right, and the use is often permitted by right, which can save you a year. Expect the large open room to be missing. Medical buildings are subdivided by design, and demolishing enough of one to create a day room and a gym sometimes costs more than building both out of an open shell.
Three conversion premiums, three schedules. Pick the one that matches the constraint your program is tightest against.
How do you weigh the buildings that pass?
With two or three viable buildings in hand, switch from pass or fail to relative cost.
Start with geography relative to where participants live. Transportation is one of the largest controllable operating costs in a PACE program, and every mile between the center and participants' homes shows up in your van budget every day for the life of the center. It also shows up in the participant's day: a 45-minute ride each way is a bad day for a frail person, and it affects attendance, which affects your census. I would take a worse building at the center of the population over a better one at the edge, and I have advised clients to make exactly that trade.
Check access for everyone who is not on a van. Your staff care about transit and commute time in a tight labor market, and family members visiting the center will drive themselves. Confirm arterial access for the vans, and go stand at the driveway at 8:15 on a weekday morning to see whether a left turn out of the site is possible.
Price the conversion, and price it the same way for each survivor. Have one general contractor price all of them off their test fits rather than comparing rent per square foot, because the construction delta between two conversions is routinely larger than the rent delta.
Test the landlord. A conversion of this size needs an owner who will hold the building through entitlement and permitting, fund a large tenant improvement package, and sign a lease with a licensing contingency in it. Make that ask early, and make the case that PACE tenants are unusually stable: the license is tied to the address and the program does not move casually. That argument changes what a landlord will fund.
What do you give up when only two buildings qualify?
Here is the trade that shows up on almost every PACE search I have run. Building A sits in the right place but needs a conditional use permit for the day health use, which is ten months of entitlement before you pull a building permit. Building B is three miles farther from the population center, permitted by right, and you could be in construction in 180 days.
Take A and you open a year later with a better long-term transportation cost. Take B and you open on schedule with a permanently worse van budget. Decide by which constraint is binding. If your state readiness and CMS milestones make the earlier opening effectively required, you cannot absorb entitlement risk, and B wins even though the pro forma prefers A. With schedule slack, A is usually the better twenty-year decision.
Do not wait for a third building. That gives you Building A's schedule with none of Building A's certainty, and in a two-building market one of the two will usually be leased to someone else inside a year.
What changes when you run the search in this order?
Ask the first question about every building in the service area: can it legally and physically become a PACE center on our timeline? Ask the second question, which of these do we like, only about the survivors. Run it in that order and the ruling out costs you an afternoon of aerials and a week of phone calls, and your diligence money goes to two or three buildings instead of ten.
Then move. When the viable set is two buildings and one will be gone by spring, speed across the whole market followed by real diligence on the short list is what gets you a center that opens on your program's calendar.
Key takeaways
- Screen every building in the service area against six pass-or-fail requirements before weighing any of them: permitted use or a viable entitlement path, a contiguous 12,000 to 20,000 SF floor plate, a van drop-off loop, parking for 40 to 120 staff plus vans, utility service for a commercial kitchen, and capacity for the census in your pro forma.
- Run the screens in order of cost to find out: free desk checks (zoning, parcel, aerial parking count, single story), then phone calls (planning, utility, broker), then paid diligence ($15K to $50K per building) on survivors only.
- Check the van drop-off loop in an aerial in week one. It rules out more retail buildings than any other requirement and is the most expensive thing to discover after signing.
- Weigh survivors on geography relative to participants' homes first. Every mile shows up in the van budget daily for the life of the center.
- When the choice is a by-right building versus a better-located one that needs a conditional use permit, decide by which constraint is binding: the program's licensing calendar or long-term transportation cost.
Frequently asked questions
What kind of building works for a PACE center?
Almost always a conversion, because nobody builds PACE centers on spec. Former grocery, drugstore, and big-box buildings usually have the floor plate, parking, and often ample electrical service, but need kitchen gas and exhaust, sewer capacity, and a van loop. Former office buildings have the plate but lack parking and kitchen infrastructure. Former medical buildings have the plumbing and often the permitted use but lack the large open day room. Screen all three against the same six requirements.
How big does a PACE center building need to be?
Roughly 12,000 to 20,000 square feet of contiguous space, ideally single story, depending on the census the program needs to serve. Column spacing and clear height matter as much as square footage, because the day room and rehab gym need large uninterrupted spaces. In Retained CRE's PACE searches, a building's daily participant capacity, not its total square footage, decides whether it can support the pro forma.
Can a former retail store be converted into a PACE center?
Often, and it is one of the most common conversions. Retail boxes usually offer the right floor plate, ceiling height, and parking ratio, and a former grocery or drugstore often has more electrical service than a PACE center needs because of its refrigeration load. The problems to price early are gas and kitchen exhaust, sewer and grease interceptor, HVAC, and outdoor circulation, since retail parking fields were not designed for a van drop-off loop. Check the loop in an aerial before touring.
How long does it take to find and entitle a PACE center site?
Screening a service area takes a few weeks if you run the free and cheap checks first. Finding a viable building can take months because the qualifying set is small. If the site needs a conditional use permit for the adult day health use, budget six to twelve months of entitlement before a building permit. The approach I use at Retained CRE is to screen the whole market fast and move on a viable building rather than wait for a perfect one.
Searching for a PACE Building?
I run PACE site searches from the first zoning screen through the test fit, and I have converted retail, office, and medical buildings into centers that opened.
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