Navigating the commercial real estate decisions related to your medical practice is more important than ever, based on current economic conditions and with changes taking place in health care technology and health care delivery.

A medical office can be a long-term commitment, making it critical that medical practitioners carefully perform their due diligence to make the most informed decisions regarding their real estate. It is important to ensure their goals and objectives are best being met, their risk is being mitigated where possible and they are setting themselves up for success by choosing an office that best suits their needs with respect to location, budget and functionality.

Location

Location is likened to the “golden rule” of real estate, and the location of your medical office is one of the most important factors to consider when deciding to open or relocate an office. Once a specific geographic area has been determined, many other factors should be considered to ensure the success of your office location. Some practices are more of a destination spot and can locate on a secondary road while others require retail-type exposure and visibility on a major thoroughfare; each should consider a location that is both convenient for patients and easy for patients to find.

Budget

Budget is a huge consideration when deciding where to set up an office, as your office occupancy costs will likely be one of the largest expenses your practice incurs next to labor. Not only should you understand what office overhead your practice can support, but you must be aware of market rental rates and/or sale prices in the area in which you want to locate to ensure that your budget matches the market area.

Functionality and Layout

Since it is expensive and time consuming to relocate a business and many medical practitioners stay in the same office location for many years, it is important to evaluate and review those factors most important to your specific practice when deciding on an office. Special consideration should be given to the ideal square footage to meet your immediate and projected growth needs, as well as what layout is most conducive to your practice to ensure that the space will properly fit your furniture, medical equipment and allow you to work effectively and efficiently.

Real Estate CompassAn office layout that is functional for your needs and requirements can help an office run more efficiently. If your practice lends itself to a large number of patients or family members in the waiting room at any one time, having a small waiting room with insufficient seating could be a costly mistake. Alternatively, some medical offices work well with very small exam rooms and limited counter space and possibly don’t require a sink in every room, while others need large exam or procedure rooms with room for large specialty lighting, equipment and fixtures and also need ample counter, cabinet and plumbing in some or all rooms. Some practices are chart and paper intensive and need substantial chart storage space, while others are virtually paperless and therefore require differences in layout. Some medical offices prefer to have a patient bathroom in the lobby versus having waiting patients requesting entry to use the interior facilities and some offices need special adjustments made to their check-in and check-out areas.

Other Important Considerations

While not intended to be exhaustive, the following list describes some additional factors to consider when selecting a medical office to buy or lease. Parking: Is there adequate parking for your needs? While city or county codes will detail parking requirements depending on the use of a property, you need to ensure that the parking available meets your needs. Signage: Does the location offer adequate signage for your business and/or ample signage for your patients to easily find your office? Accessibility: Is it relatively easy for patients to find your office and get in and out of your parking lot? Image: Does your office provide an image or aesthetic component that will make your patients feel comfortable and coincide with the image your business is trying to project? Plumbing / Electrical: Does your office offer adequate plumbing and electrical for your practice; if not, is it viable and cost effective to have these items added?

Lease, Buy or Lease with Equity

Many factors play a role in a physician’s decision regarding leasing vs. buying. Personal preference could be the deciding factor; however, supply and demand, pricing, tax and legal considerations will be determining factors. A lease with equity can be an attractive option to some physicians, as this is a hybrid between leasing and buying, providing the physician with equity but not requiring the capital outlay of a traditional purchase.

Leasing

Be forward thinking; consider build out modifications or upgrades that will be required or desired during your tenancy in the building. Think of your future and the future of the property so you don’t find yourself in a location where you want to stay well beyond your lease term and the landlord has different goals and objectives. Leases can be negotiated in a number of different manners; there are times when it is appropriate for landlords to offer a tenant some build out allowance and/or free rent and there are other situations where it is appropriate for the tenant to bear the cost of their build out. Depending on the economy, market and space being considered, there are many additional important factors to consider when leasing. Physicians should understand the concept of rentable vs. useable square footage when weighing various office rental options. For example, you may require more rentable square footage than anticipated when renting in a large multi-tenant office building because the square footage you are paying for may include your shared use of the common areas of the building. Depending on the type of practice you have and what location considerations are important to you, having other practitioners in the same building and having access to common area shared amenities may be well worth it!

Buying

If purchasing an office is better suited to your specific goals and situation, there are many different financing vehicles available. Financing institutions can vary in the programs they offer to physicians, with some lenders offering more attractive financing options than others.

Additionally, there are programs available through the Small Business Administration that combined with bank financing can allow a physician to buy their office with as little as 10 percent down. These programs can be a great option for new practices starting out, as well as long established practices looking to buy real estate for their office.

Financing

Whether you lease or buy your office space, there are financing programs available to help new practices get going, by offering some working capital and financing many start-up costs, such as: medical equipment, furniture and computer equipment. Some of the financing programs available can structure the repayment timing where the physician pays less in the early years of the loan and more in the later years of the loan, thereby reducing initial start-up costs and giving the physician time to build their business. Starting with your own bank is a good idea; however, keep in mind that financing is a competitive industry and there may be more negotiation room than what is initially offered to you.

Fielding an experienced team in place to help guide you will help ensure your success in finding the ideal office location and help in negotiating the best possible terms is critical so you can make educated decisions, while staying primarily focused on what you do best, practice medicine! Your team should include: An experienced commercial real estate broker to help explain various critical leasing and/or buying considerations, a CPA or tax advisor to help you determine the tax implications of leasing vs. buying, an experienced real estate attorney and healthcare attorney to help you determine the legal implications of leasing vs. buying for your practice and to advise you as to what type of entity should be formed to sign a lease under or take title under to best protect your interests. Depending on the scope of the office project, other professionals and consultants should be engaged, such as contractors, engineers, architects, medical equipment salespeople, furniture, phone system and IT vendors, etc.

While a physician may negotiate for an office location as infrequently as once or periodically every several years throughout their career, a seasoned and professional commercial real estate medical office specialist does so continuously and can be a valuable asset and member of your team to help you navigate the complex commercial real estate leasing, buying or building process. Commercial real estate professionals can help with: selling an office, buying an office, renewing a lease at an existing location, expansion or contraction in office space and can even assist with finding a doctor to sublease excess space.

For more information, please visit www.tampamedicaloffices.com or call The Mahr Company, licensed real estate broker at (813) 835-4888.

About The Author

Group Publisher

Group Publisher, Doctor's Life Magazine | Managing Director, Mashed Media Group, LLC

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