Finding a Healthcare Location Worthy of Your Practice to Lease

Dale and Jeff - Back to BackBy Dale Willerton and Jeff Grandfield – The Lease Coach

The reason we say worthy of your practice is because most healthcare practitioners spend many years in college getting doctorate degrees. For the most part, these are professionals dedicating their lives to keeping the rest of society healthy. These doctors deserve excellent locations allowing them to run profitable practices and to sell those practices when they retire.  However, the demand for quality medical space is high – this means that many doctors often mistakenly settle for secondary locations, resulting in a lighter patient load, less income, and a practice worth less money 25 to 30 years later when it’s time to retire and sell.

Doctors need to be very careful that the landlord’s real estate agent doesn’t attempt to charge them an artificially higher rental rate just because they are doctors. The perception is that doctors charge high professional fees, so that they can afford to pay high rents. That’s not necessarily correct. It can be true that building out a medical office can be expensive, which is all the more reason that doctor tenants need reasonable lease terms.

As negotiators, most doctors prefer to avoid confrontation and openly admit they need or want help with their new leases and lease renewal deals. Mistakenly, doctor tenants often turn to attorneys for help thinking this is a legal process and thereby not getting much help on the real estate side. If you know you’re not a good negotiator, feel that you don’t have time to handle the business side of your practice or prefer not to enter into these waters, hire the right type of help – get a professional who is actually working for you and is being paid by you to represent you.

Moving a healthcare practice is expensive. So, if you don’t get the location right when you sign a long-term lease agreement, you may be taking on the future expense of relocating at the end of your lease term. Some of the same components of a good retail lease also apply to a doctor’s space requirements for lease. Doctors need new patients to replace the ones they’ve helped and healed. So a strong location is often very important to these professionals, especially in the formative years of establishing their business. Medical offices may be open only four or five days a week, while the retailers beside them are open seven days a week. This means that some doctors must do all of their business in a shorter time period to pay the same rents that retailers pay while being open more hours. Of course there are healthcare offices open every day of the week, but these are usually multiple doctors’ office that can share the work and the patient load.

The failure rate of healthcare offices is miniscule compared to the default-ridden restaurant industry. The landlord can literally bank on a doctor tenant to remain in that same location for 10 to 20 years (or more) and pay their rent on time. The landlord’s mortgage holder will often show preference to properties with doctor tenants – thus making you a “golden tenant” to the landlord.

If your office is only seeing a few patients at a time, your tenancy will take up far less parking than other tenants such as restaurants, bars or retailers, and most landlords know that having a good mix of tenants from different industries with various uses is better for their parking ratios as well. If a landlord is trying to create a retail complex, they may reject healthcare tenants and hold out for retailers. Nonetheless, most landlords need and desire doctors to lease space from them. It’s nice to be wanted, isn’t it?

The Lease Coach is putting the majority of our doctor clients into grocery-anchored retail plazas or properties that have good visibility and accessibility/exposure to drive-by traffic. Visibility is crucial as people who drive by your office regularly will remember you when they need medical care.

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to DaleWillerton@TheLeaseCoach.com.

Dale Willerton and Jeff Grandfield – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals For Dummies (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

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1 COMMENT

  1. I can understand just how important it could be for a medical care providing to find the right office space and location for their practice. Like the article mentions, settling for a secondary location could result in less patients, less income, and a practice worth less money in the future. I think the advice to get a good real estate agent that can help you find the right space, in the right location, and for the right price would be indispensable.

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