Category: Medical Real Estate

Medical Office: Considering a Satellite Location?

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Although a satellite office is a great and fairly inexpensive way to extend your reach into other markets, it will require you to divide your time and resources, with no guarantees of return or performance. It is therefore imperative that you take adequate precaution to protect your practice, yourself and your finances.

Weigh the risks. The biggest risk practices face when opening a satellite office is that patients do not materialize as anticipated. Some groups have ultimately closed their new office because of a lack of patient volume. When a practice can establish a master schedule that includes a mix of follow-up patients and new patients that would fill the satellite office days, it can maximize the physician’s time.

Think small and short term. Many experts advise medical professionals to “think small” when it comes to satellite offices – no more than 2,000 square feet (depending on expected patient volume). Start your satellite office with a short-term lease, if possible 1-2 years in length with a renewal options. Look for ways to protect yourself with a termination clause if the office no longer makes economic sense.

Subleasing space from another doctor with a different and/or complementary specialty is a smart way to minimize your rental obligation for a satellite office. This arrangement may allow you to take advantage of shared common areas and support staff. With an existing doctor’s office, you can eliminate or at least reduce the tenant improvement exposure. In a sublease from another physician group or even a timeshare, you can limit the amount of space you need to about 500 square feet, which would include a couple of exam rooms and part of the reception area or even just to ½ day increments.

In comparison, the smallest suite you would lease on your own would be double that amount at about 1,000 square feet. In that scenario, you would pay the full cost of two or three exam rooms, an office, a lab space and a work area.

Most practices will know after a year of operations if they are going to gain traction in a market with their satellite office. At that time you can evaluate a longer-term arrangement.

Diagnosis: It may be beneficial to consult a medical leasing specialist. There are often existing subleases available (at a discount) for medical suites that have been vacated by another group. A good broker will know the market and available ready medical suites where advantageous deals can be achieved minimizing the commitment, expense, risk to the physician, and the practice.


Understanding Commercial Leases

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Once you decide to start your own business, it is imperative that you understand the basics of a commercial lease. Renting commercial space is a big responsibility and the success or failure of your business may depend upon certain terms of the lease. It is therefore recommended that you work with a Tenant Advisor to ensure that you understand the market and have an advocate in the negotiation of deal terms.

Before you approach a landlord, you should understand how commercial leases differ from residential leases. Here are three of the biggest distinctions:

  • Consumer protection. Commercial leases are not subject to most consumer protection laws that govern residential leases so there are no standard forms. Rather, most commercial leases are customized to fit the landlord’s needs. As a result, you should thoroughly examine every commercial lease agreement that is offered to you.
  • Long-term, binding agreement. The lease is a legally binding contract with a good deal of money at stake for the signing parties. As a result it is extremely difficult to break or change a commercial lease. Commercial leases are generally subject to much more negotiation between the business owner and the landlord. However, depending on the eagerness of the Landlord they may be flexible and receptive to special features for a tenant’s office space and possibly lease clauses.
  • Meeting Your Business Needs: Before you sign a lease agreement, consider the amount of rent you’re planning to pay, company budget and the length of the lease. With a growing company it’s important to consider not only today’s budget but also expected future changes in staffing, patients and space needs.

While you may not want to commit to a longer term lease, these often provide better incentives like lower rates and more willingness for a Landlord to spend money on improvements or offer concessions. A shorter-term lease with renewal options may be safer so you can carefully determine how your business may grow and if the location is right.

Working with a real estate professional and space planner can help determine the proper balance and offer some good guidance. A main concern is the physical space and its efficiency. Specialists in advising on real estate matters can help assess the required modifications to the existing space, [i.e., adding offices, exam rooms or rewiring for better communications] to make sure that first it is possible to make the necessary changes, and more importantly, to provide valuable advice in negotiation of the Landlord’s contribution.

There are myriad items that must be addressed in every lease. While every business owner has different needs and intents, before signing a lease, make sure your decision is well thought out, because your future will depend on it.