Plan office space search carefully

February 25, 2013

When renewing your lease or searching for new space, here's a strategy so you don't spend time or money unnecessarily.

Virtually every day, medical practices of all sizes embark on a lease renewal process or a search for new space. More often than not, they do so with no plan or strategy in place. As a result, they often end up spending time and/or money unnecessarily.

Building and property owners naturally will seek advantages in their lease agreements. That fact means that doctors or their practice managers must allow plenty of time for the process of finding the right space and negotiating a new or renewed lease, carefully defining their needs as they consider all the possible alternatives for attaining their desired goals.

This can be a more daunting task than many people expect. It is not always easy to locate space for doctors’ offices and other medical facilities, because many landlords wish to avoid the possible legal liabilities, high traffic, increased water use, above-average power needs, and health department approvals sometimes associated with such facilities.

The process is sufficiently complex that allowing enough time to complete the build-out and other aspects of the project becomes mandatory for managing it. To lease and build out standard space of 10,000 square feet for a healthcare facility in an existing building can take up to 2 years to do the job correctly. If the project is an ambitious one, with extensive new construction, then a longer time horizon could well be necessary.

Some practices use a management company and/or an expert broker to help with these tasks. Others do it all themselves. In either case, success in a space search or lease renewal depends on carefully planning and then implementing a detailed project plan. Must-have elements of the plan include scheduling all of the organization’s anticipated resources, developing an accurate and rigorous method for estimating costs, and establishing firm site selection objectives including size, location, price, and whether the property will be a lease or a purchase.

Before starting a site search or lease renewal negotiation, it’s important to ask the right questions. For example:

  • Does your practice need to maintain a certain image above all else, or is price the most important consideration?

  • What are the needs as far as accessibility?

  • Is parking a priority?

  • How important is access to public transportation?

  • Are there specific requirements as to where the practice is located that should outweigh the other preferences?

Because location, infrastructure, and cost are keys to operating a successful medical facility, avoid becoming enamored with a particular property. Instead, it may be necessary to negotiate on more than on site simultaneously.

When a lease is involved, examine all lease documents carefully to avoid hidden costs related to operating expenses, taxes, landlord’s services, and the tenant’s end-of-term requirements. If necessary, seek help from an attorney specializing in real estate or a commercial real estate expert for issues such as escaping a lease that favors the landlord or the property developer, or locating the right space that fulfills all of your requirements.

It helps to think of space acquisition as a process and to create an integrated process model to develop and secure the best and most cost-effective clinic, laboratory, waiting room, and office space. Use of such a model can enable the manager to control the process instead of having it control the manager. If necessary, consider asking an expert to assist in the process. Doing so often can save thousands of dollars and enable your facility to be up and running in a timely fashion.

The author is senior director at First New York Realty Brokers LLC, New York, New York. Send your personal finance questions to medec@advanstar.com. Also engage at www.twitter.com/MedEconomics and www.facebook.com/MedicalEconomics.