Every industry has them—rampant myths and misinformation. The more complex the industry, the more misinformation is readily available. And since medical real estate is a niche market of commercial real estate (CRE), it’s easy to see how misinformation can spread so easily.
So, we’ve put together a list of truths to dispel four common medical real estate myths. For more information about these topics and other medical real estate details, check out our medical real estate resource page.
Myth 1: All Leases Are the Same
Leases are not all identical, and that’s how it should be. Not only is each market area different, but each tenant is unique as well. Some landlords and tenants may negotiate a single net lease, and others may have a triple net lease. Some landlords may cover tenant improvements (TI) in the deal, and others may require the tenant to pay for them. Leases should reflect the requirements of the landlord and the needs of the tenant. All parties and their advisors should review leases individually, paying close attention to the local market and the elements that are specific to each facility. And just because a tenant signs a lease in one market, that does not mean the same lease should apply for that tenant in another market.
Myth 2: Leases Don’t Have to Be Renegotiated Before Renewing
Never renegotiating a lease is a quick way to incur unnecessary expenses. Leases should always be reviewed at least one year before the current term ends. Markets change over time, and leases should reflect those changes. Additionally, buildings are tangible assets that require maintenance and updates over time. Those upgrades should be discussed during lease negotiations. Some details may not change during the renewal process, but tenants, landlords, and their advisors should always review their leases before making those decisions.
Myth 3: Medical Buildings Are No Different Than Any Other Building
Medical practices require unique buildouts to house medical equipment, patient rooms, or surgical spaces. Extra cabinetry, additional interior walls, and waiting room spaces are some standard requirements. But the interior of a building is not the only difference between medical facilities and other types of buildings. Medical facilities can also require extra plumbing and electrical lines to adequately facilitate patient care. The structural differences can become costly and all parties should consider them when reviewing the purchase or lease of a new or adaptive reuse facility.
Myth 4: CRE Advisors Aren’t a Necessary Part of a CRE Deal
We live in a DIY world where, after spending a few minutes searching the internet, it’s easy to think anything is possible without professional guidance. But just because it is possible to sign a lease without an advisor, that doesn’t mean tenants and landlords should go it alone.
CRE advisors spend years learning the details of CRE. They understand all of the contractual terms and their implications. HBRE’s team of medical real estate advisors also have a thorough knowledge of regulations that specifically apply to medical real estate. Stark Law and the Anti-Kickback Statute (AKS) are just a few of the many medical-specific elements that they consider when reviewing their clients’ deals. They have helped protect their clients from unfair deals and unnecessary expenses.
Managing CRE takes time. Not only can it take years to learn how to structure the right deal and balance the tenant-landlord relationship, but each deal can require consistent maintenance. CRE advisors dedicate their time to study cap rates, review market data, and travel to sites for an in-person look at the local market. HBRE advisors offer the valuable assets of their time and expertise to both tenants and landlords. Most importantly, HBRE advisors can help tenants and landlords cut through other common commercial medical real estate misconceptions and tailor a contract to their needs.
If you are interested in learning more about investing in commercial real estate, or if you have questions about buying, selling, or leasing a commercial property, please contact an HBRE advisor. Our team of experienced CRE professionals have the skills and insight to assist with all property transactions. To reach out to us directly, email [email protected] or call 615-564-4133.
