Not all commercial real estate (CRE) properties are created equally. In fact, almost none of them are. Each property is as unique as the tenants they house. And the sector with a multitude of examples is medical real estate.
Pediatricians, podiatrists, neurologists, heart surgeons, primary care physicians—the list goes on—all have specific requirements for their spaces. While some may share the same equipment or types of treatment, their facilities are vast in scale and blueprint. Their collective differences set them apart from other CRE sectors. Here are a few ways that medical real estate differs from other CRE property types:
CRE Lease Terms
Medical real estate lease terms can differ from other CRE agreements. For example, medical practices typically remain in the same facility for a longer period of time than other tenants. The longer lease is largely due to the high construction costs associated with medical real estate. A medical practice that plans to stay in the same facility for a longer duration can be a significant advantage for a landlord or health system.
Tenant Improvements and Facility Design
Medical practices typically require a different set of tenant improvements than other properties. Due to the nature of their field, medical tenants may use more water and electricity than other commercial tenants. Depending on the type of medical practice, some tenants will also need back-up generators so that electricity is not compromised while caring for their patients.
Medical facilities do not have the same physical structure as other CRE properties. The internal layout of a medical facility often requires multiple rooms and rarely has an open floor plan. While some medical tenants choose adaptive reuse, it often takes major renovations to transform the property for medical use. For example, many patient rooms include cabinets, extra plumbing, and additional electrical lines to assist with patient care. In addition to facilitating patient treatment, the building usually includes additional rooms for visitors, accessibility for disabled patients, and tall ceilings for large medical equipment. Each medical space must meet the needs of each type of medical care. These unique necessities contribute to the costs, and all parties should keep them in mind during lease negotiations.
Medical CRE Legislation
There are a few important legal topics to address in medical real estate contracts. Stark Law and Anti-Kickback Laws are two of the most notable legal issues for medical CRE owners. In short, they protect against healthcare fraud or abuse. Violation of these laws may be damaging and expensive for health entities. These two laws are specifically related to healthcare real estate, and therefore set healthcare real estate apart from other property types.
Medical Properties Are Vital
Consumer trends are changing. But while industries like retail are volatile, medical care is a necessary part of life. Because of this, medical real estate can thrive. CNN even suggests that companies who own medical properties or REIT investors are likely to weather out the current economic downturn. The same source also said that these types of investments are safe bets outside of the difficult current economic situation. In fact, the development of more medical properties has been on the rise for a few years now. And more medical properties are expected in the coming years.
If a health system or landlord is considering housing a medical tenant, they should strongly consider consulting a medical real estate advisor. These types of advisors are skilled in that specific type of real estate and can help navigate the unique factors that arise within a healthcare lease. A sector as unique as healthcare real estate requires advisors who have experience in that industry. HBRE’s team of advisors work exclusively in the medical real estate sector and are the necessary resources to negotiate the right contract for their healthcare real estate clients.
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.
