It would be easy to assume medical real estate is like every other type of commercial real estate (CRE). But that’s not the case.
Unlike other commercial property types, healthcare facilities host a variety of uses. For example, there are eight different types of industrial properties, but there are over 135 different types of medical specialties in the United States. Each property must be tailor-made (and approved) according to its use. Accessibility, electrical and plumbing needs, and building codes for medical properties are unlike those of other commercial properties.
With different medical uses comes the necessity for specific legislation and structural aspects. But not everyone in the industry, not even a general commercial broker, will know those requirements and how they all work together. There are quite a few misconceptions about the healthcare sector.
The Location
As long as a medical building falls within the correct zoning within its community, it can host a medical tenant, right? Unfortunately for medical practices, zoning restrictions are not the only requirement. Zoning is part of it, especially if the location would require a zoning change request. But, depending on their scope of services, medical practices may also be subject to Certificate of Need (CON) and/or licensing requirements to open their practices. Then, they have to consider the community infrastructure to ensure the location can handle the additional traffic.
Medical practices must also think through the competition in the area. With the increase in outpatient facilities and medtail clinics, suburban areas are experiencing more competition in local markets. To get an accurate read of the potential patient base of a new medical practice, medical real estate advisors typically assist with heat mapping. Then the medical practice will have a more accurate read on the location they are interested in.
The Building
Not every building can fill a vacancy with a medical practice. As mentioned in the above section, there are often restrictive zoning requirements. Additionally, the build itself typically has to undergo significant renovations. Sometimes the interior layout is the least of the changes. In some cases, medical practices need to complete major upgrades, such as installing new hood vents for laboratory ventilation (a substantial expense). Occasionally, they even have to add specialized materials within the structure. An X-ray room alone requires the medical practice to add lead lining within the walls. Prospective medical tenants should discuss these buildout elements with their potential landlords and review the costs before determining if a building is suitable for their practice.
What Type of Broker Can Handle the Deal
Perhaps one of the most common misconceptions in the healthcare real estate sector is the belief that any commercial broker can handle medical real estate. Since healthcare properties are commercial properties, it may seem like these transactions are all pretty standard. But what many people don’t realize is that the medical sector involves regulations, requirements, and legal restrictions that other properties don’t have.
One example is the Stark Law and Anti-Kickback Statute. Medical practices should have a legal representative to ensure they abide by the legislative rules. But the broker also needs to have a thorough understanding of these requirements, or else they could misguide their clients. A healthcare real estate broker typically has a working knowledge of healthcare-specific regulations.
Beyond the legal requirements, medical real estate advisors tend to know the idiosyncrasies within the sector. They understand how tenant improvements (TI) work in a healthcare property. They know how to communicate the unique building needs to a developer. They understand the needs of both the landlord and medical tenant, so they are able to adequately communicate the expectations for both parties and enhance the tenant-landlord relationship.
HBRE is a full-service healthcare real estate practice. We solely serve medical practices as both landlord and tenant representatives. While there may be many common misconceptions about the niche healthcare sector, we understand the full scope of the industry. We use our in-depth insights to offer maximum value to medical practices across the country.
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.
