The pandemic has impacted healthcare real estate, but do you know what that means for healthcare providers occupying or looking for space? One thing is for sure, the pandemic has presented a reason for every healthcare professional to examine the current physical footprint of their facilities along with the economic terms of their lease or mortgage. However, despite recent challenges, the healthcare market remains pandemic resistant. Due to long-term leases, exceptional minimal default rates, stable occupancy, low-interest rates, and in-demand tenants, healthcare real estate has remained steady and resilient.
Since medical professionals are some of the strongest and most highly sought-after prospects for a landlord or seller, they are considered low risk. That is because they are both financially and professionally better positioned than traditional office or retail users. The healthcare industry proved itself over this past year and a half. When patients needed a physical therapist for an injury or a dentist to fill a cap, those professionals were there whether there was a pandemic going on or not.
Landlords typically give generous tenant improvement allowances, especially post-COVID. That is because healthcare professionals invest heavily in finishing their space. Often, long-term leases with these types of clients offer more secure and better terms because landlords want to secure tenancy and avoid the high-risk scenario of increased vacancy. Commercial real estate favors healthcare providers because of their long-term stability and incredibly low default rate. Therefore, how do you protect the well-being of your practice beyond the pandemic? Consider the following before completing your next real estate transaction.
Real Estate is Your Second Highest Cost
Aside from your staff, real estate is the second-highest cost medical professionals encounter. The great news is that providers can get an even better deal today than they did before the pandemic. If you have thought about purchasing, relocating, expanding, or leasing in the next few years, it is never too late to start the process of exploring your options. Having an experienced healthcare real estate agent on your side will be key to your success in this endeavor. These types of experts will save you both time and money while helping to avoid costly pitfalls and delays in the process.
Limit Future Liabilities
Did you know that clauses are often an overlooked part of a healthcare real estate transaction? Most healthcare professionals lease the office space for their practice. Knowing and understanding these terms can protect your business from avoidable risk and liability. An experienced healthcare real estate agent can help you navigate the cumbersome process and achieve favorable results. To help limit a practice owner’s liability, two specific issues should always be addressed. They are lease assignability and death and disability. Most doctors have the primary goal of selling their practice when they are ready to retire as an exit strategy. That means it is absolutely critical the terms and conditions are favorable to achieve this result. Similarly, the death and disability clause allows the tenant to be released from the commercial lease in the event of a tragic situation, protecting the doctor’s spouse, family, and estate.
Believe it or not, these terms and conditions are fully negotiable, but they are often left out. Consider adding Pandemic and Force Majeure clauses as well, which are common in healthcare real estate leases to protect certain obligations during extraordinary events, such as pandemics. To reap the benefits of a long-term lease while still protecting yourself against unforeseen circumstances, these are important clauses that can be negotiated by a healthcare real estate agent. Taking the time to address these clauses in a lease is a specialty of HFS. They are not to be glanced over quickly or taken lightly.
Renewal of a Lease
Even if you have no intention of leaving your current building, you should always understand the market and your available options. This is crucial for creating the leverage you need for a lease renewal, which rarely favors the tenant. Since most renewals favor deals and much higher margins for landlords, you need to be a savvy tenant with a true real estate strategy. It is very common for a lease renewal negotiation to contain concessions like what a new tenant would receive. The challenge is getting that landlord to do what is fair through firm negotiation and a strategic plan of action. That is the exact role of a healthcare real estate agent.
Surround Yourself with Experts Who Know
Healthcare real estate is a unique market and no one-size solution fits everyone. However, with the right team of experts on your side, you can use leverage and profitability to your advantage, especially given the current nature of the pandemic. HFS is a leader in healthcare real estate brokerage. We take great pride in helping dentists, physicians, physical therapists, and veterinarians improve the success of their practice. We love healthcare real estate and understand it extremely well. It is our specialty!