Having a medical office space could prove to be a worthwhile investment in establishing your practice. However, the conditions and clauses involved in a medical lease agreement are different from those in other commercial leases. You can visit here to get in touch with an experienced medical office broker by booking a free consultation.
Lease terms should make financial sense to you. For example, if you spend too much money acquiring the building, you may not have enough money to buy new equipment, hire sufficient staff, etc. When you hire a broker, you can set a fixed budget, and they will find you the property that matches all or most of your requirements within your budget.
Things You Should Know About Lease Renewal for Your Medical Office
Know the Market Costs Before Renewing
Real estate costs are affected by various environmental and economic factors. For example, despite being one of the least affected sectors in the pandemic, there was an annual decline of 12.7% of investments in the medical office space.
According to a Deloitte report, average rent collections in the health care sector remained above 90% even in the middle of the pandemic. Also, the medical office space is expected to rebound from the slump of 2020 pretty quickly.
These factors need to be considered when negotiating a lease renewal. Know what other medical and commercial offices are paying in the area. A broker with experience in dealing with medical leases could help you navigate through real estate concerns.
Now that you have been in an office space for some time, you might want to expand your practice: more rooms, better equipment, and increased staff numbers. You will have to customize your office space to make room for these improvements.
Details such as contracts, payments, and changes will have to be discussed with the landlord beforehand.
If you do not already have an exclusivity clause in your agreement, it is highly recommended you add one when negotiating a lease renewal. For example, if you own a dental practice in a business complex, you do not want another dentist to set up shop in the same complex.
Having an exclusivity clause in your agreement ensures that the landlord cannot lease out space in the building or complex to your competitor.
Annual Rent Escalation Clause
Most lease agreements have an annual rent escalation clause built into them. The clause lets the landlord increase your rent according to the conditions agreed upon at the time of signing.
The increase can be structured as a fixed percentage, or it can be inflation-based. If ignored, you could end up paying an unfair amount of rent for your medical space.
Many such clauses need to be evaluated at the time of lease renewal. It would be best to hire a broker with the know-how of medical offices to deal with negotiating leases.
You must understand real estate laws and comparative market costs before negotiating a lease renewal with your landlord. Various clauses in the lease could either help grow your practice or could end up increasing competition and limiting your revenue sources if ignored.