Healthcare leases are idiosyncratic, fine-tuned with specific legal requirements. So the processes, negotiations, lease terminology, market research, and other topics may seem overwhelming and complicated. It’s true that this sector of commercial real estate (CRE) is very involved and sometimes requires extensive knowledge of lease language. But professionals who have been in the industry a while have acquired specialized knowledge and have developed hyper-focused skill sets through years of industry experience.
Healthcare real estate professionals interested in signing a commercial lease often trust commercial brokers to assist them. Healthcare brokers understand what lease details are most important to a medical practice. They use their experience to develop lease terms that best fit the needs of their practices.
The Process
CRE transactions undergo a lengthy process before anyone signs the dotted line. After the financial analysis, market research, and site selection are complete, the prospective tenant and healthcare broker discuss the next steps. They outline the prospective tenant’s requirements for their space and discuss how to include them in the lease. Then the healthcare broker initiates a conversation with the landlord.
Letters of Intent
A letter of intent (LOI) is a nonbinding document that outlines what items will be included in the lease. These details include the address, square feet, general lease terms, and the date that rent payments will begin. Healthcare brokers submit the LOI to the landlord and then negotiate what the landlord will or will not agree to. After both parties finalize the terms, the LOI is sent to a commercial real estate attorney to draw up the lease agreement. The healthcare broker reviews the lease thoroughly to ensure that the attorney has included all of the items and the general intent of the LOI.
Free Rent
The term “free rent” is often used when a landlord waives the first month or two of rent while a tenant settles into their new space. Free Rent is a concession given by the landlord to a tenant, often as an incentive to the new tenant, either in lieu of or in addition to a tenant improvement allowance to update or make upgrades within the leased space. This option is a useful negotiation tool for tenants. If landlords are not willing or able to provide financial contributions that a tenant is requesting for improvements to the premises, the landlord may offer a lower starting rent rate, or they may be willing to provide rent abatement as a concession for the tenant to make the terms work for tenant who is investing in the landlord’s property by making improvements to the leased space.
Healthcare Real Estate Negotiations
As we mentioned above, lease deals are multi-faceted and complicated legal documents. It’s in the best interest of both healthcare practices and their landlords to make sure those details are correct. Since healthcare lease terms are typically longer than other sectors, an incorrect lease can last for years, maybe even decades.
At HBRE, our expertise is in healthcare real estate. We are familiar with handling deals for healthcare parties like investors, private practices, and healthcare systems. We guide our clients through the above steps to help them find the property that best fits their practice. Tasks like letters of intent, free rent, and other complex aspects of commercial real estate are what we do best. We do whatever we can to ensure our healthcare clients have a lease that will benefit them for the duration of their time in their facility.
