A Commercial Lease in Healthcare Real Estate
At the beginning of 2021, we published an article outlining why paying a lower rent rate doesn’t necessarily save money. We discussed a few of the reasons a landlord would allow a lower rent rate. Some of those reasons can indicate a low-value property or a misunderstanding of the commercial lease agreement. However, there are correct ways to save money on a commercial lease. And tenants don’t have to settle for an unfavorable property or lease agreement to do so.
We should note that our team focuses primarily on healthcare real estate. While some of the following points apply to other property types, we will specifically address how medical practices can save money on a commercial lease.
Negotiate the Commercial Lease
Tenants shouldn’t settle for the first draft of a commercial lease. Negotiating the lease is one of the most basic ways a medical practice can save money. Landlords may have specific items they are not willing to change. But there are often a few elements they will adjust for the right tenant. Strategic negotiation is essential for a tenant to begin a healthy landlord-tenant relationship. Medical real estate advisors are key players in the negotiation process, so it would be beneficial for medical professionals to involve them in the conversation.
Calculate the Buildout Costs
Those engaging in a tenant buildout can negotiate a tenant improvement allowance. For a tenant buildout, the landlord provides a set amount of money per square foot. The tenant then uses that money to renovate the property to their specifications. Tenants need to make sure they have calculated the correct amount for their buildout needs. After the landlord has agreed to the amount, tenants need to be strategic about the construction process. Any expense over the allowance will come straight out of the tenants’ pockets. Additional costs can impact the tenant’s ability to pay their rent rate.
In a turnkey buildout, tenants need to pay careful attention to the agreed-upon costs. For this type of buildout, a landlord oversees the construction process. The landlord will work the tenants’ construction costs into the rental rate, so the tenant will want to make sure they aren’t unexpectedly incurring higher construction costs.
Review the Fine Print of the Commercial Lease
Medical professionals should review the numbers printed in the commercial lease. It’s dangerous to assume that all of the calculations are fully accurate. Instead, medical professionals should figure up the total costs to ensure they match what the medical practice can afford. And medical professionals should take into account the standard yearly rent increases as well. They should complete their calculations for the first year and the following years to make precise financial forecasts.
Hire a Medical Real Estate Advisor
Medical real estate advisors have the skills to guide tenants through affordable real estate transactions. They understand the calculations that determine what a medical tenant can pay for their commercial lease. Healthcare real estate advisors also review commercial leases looking for what elements they need to negotiate. Since medical practices typically agree to long lease time frames, they risk getting locked into a costly lease for years to come. But healthcare real estate advisors use their skills and experience to adequately negotiate the deal as a win for both the landlord and tenant.
The HBRE healthcare real estate team is not only familiar with commercial lease agreements but has the skills to handle the niche medical real estate sector. Our team offers both landlord and tenant representation, so we know what lease elements are vital to both parties. Medical professionals interested in negotiating a new commercial lease or renegotiating an existing lease can trust HBRE to guide them. Healthcare practices can reach out to HBRE to learn how to save money on their commercial leases—[email protected].
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.
