Avoid Medical Office Lease Pitfalls
Dan Greenfield | July 6, 2016
An Owner Rep’s Perspective on the Medical Office Lease
As an owner’s rep for physicians in the design and construction process, we have a unique perspective on the medical office lease.
We don’t negotiate leases, but we work with the tenant reps that do.
Our goal is to call out pitfalls that physicians may overlook.
A lot of issues can be avoided by using qualified real estate tenant reps. We can’t stress enough how important it is to use someone who really understands the medical office space and its unique requirements.
In Austin, Michael Buls and Thomas Allen are two tenant reps we have recently worked with that have a strong knowledge of healthcare real estate.
Of course a great deal of attention is paid to the price per square foot, the length of the lease and tenant improvement dollars which we have discussed before.
But really good tenant reps also keep physicians informed about smaller considerations that can make the whole process move smoothly and eliminate disappointments or inconveniences after you move in.
Seven Considerations to Look for in Your Medical Office Lease
Understand the following seven considerations when leasing your medical office space.
Usable and Rentable Space – One area of confusion is usable and rentable space. Usable space includes the common space – the lobby, bathrooms outside your office. The rentable space is your actual office. Your lease will include both the usable and rentable square footage amounts.
The key takeaway: Don’t confuse the two. Also make sure your designer and architect are basing their finish out bids on the rentable space; the fee will generally be lower!
Building Standards and Finishes – Typically there are building requirements governing what finishes can be used and how a medical office space can be constructed. These requirements are dictated by the building owner. Building standards and finishes are not usually listed in the lease, but you should ask for a copy of them when reviewing the terms of the lease.
We have come across situations where the finishes had to be respecified because they didn’t meet the building’s standards. Changes can be often be negotiated with the landlord. But it’s helpful to know what they before a contractor’s bid is accepted to avoid charges from change orders.
Control of Heating and Cooling – The ability to set the temperature in your medical office space is critical to patient comfort – especially for the elderly. In some properties, individual offices don’t have control over the thermostat. Sometimes they’re regulated by the building. Other times, the thermostats are in some offices and not others. When considering a space, it’s important to know how the cooling and heating is zoned and who controls the thermostat.
Parking – Your lease should list the number of spots (if any) which are reserved for your office. But remember, zoning ordinances for medical spaces often require more parking spaces per 1,000 square feet of office space than non-medical office buildings. This is something your tenant rep should negotiate.
Make certain the building parking meets city code for handicapped parking. Also depending on the services you provide, you may need to have a covered drop-off area outside the front entrance.
Wayfinding – Signage to help patients locate your medical office space goes a long way in reducing stress and increasing patient satisfaction. Generally, outdoor monument/common area signs are provided and maintained by the landlord; Interior (inside your suite) office signs are the responsibility of the tenant.
Hours – Pay attention to hours of operations especially if you plan on having evening or Saturday hours. You may need to negotiate terms for off hours use. You may be also have to pay more for heating and cooling the building during off hours.
Move In Day — Finally, negotiating a move in day comes down to timing.
From conception to completion, a typical project should take 6 to 8 months but much will depend on how much time it will take for programming, CDs, and permitting approvals.
On average, estimate a minimum of 60 days for actual construction, Make sure your contractor can meet deadline set in the lease. Failure to do so may require you to pay rent on your new and existing office space and as well as incur penalties for staying past your planned exit date.
For more information about provisions to consider in your medical office lease, please contact us to see if you would benefit from an owner rep on your office, clinic or facility construction project.