Real Estate Transactions Offer Opportunity to Maximize Profits, but Require Skilled Approach

Want to maximize profits through your real estate transactions? There are a few things you should know. Across the board, healthcare office leases or mortgages tend to be the second-highest expense behind payroll. This means that using real estate as a business tool is essential to enhancing your practice’s profits.

Of the top expenses a practice faces (payroll and real estate), only one is truly negotiable. When it comes to payroll, you either pay people what they’re valued or run the risk they go somewhere that will. Real estate, however, is flexible. It’s what you decide. Want a traditional office building? How about a retail property or medical office? You decide. Want to lease or own? That’s your decision. What about the office’s size, location or amenities? That’s on you. You choose whether you’d prefer to be in a stand-alone or multi-tenant building, the length of lease, the concessions, economic terms, business terms, and more.

So how can you maximize your real estate decision-making? Here are some steps.

Know What’s at Stake

Understanding how much is at stake with your lease or mortgage is vital for behavioral health practices. A lease contains so much more than its rate and term length. You can save with tenant improvement allowances, extension periods for build-outs, free rent periods, and more. These concessions, along with proper leveraging, have the potential to save tens to hundreds of thousands of dollars in your lease or mortgage period.

Perfect Your Timing

In real estate transactions, there’s always an ideal timeframe. Beginning negotiations too early or late signals to landlords or sellers that you don’t accurately understand the market, costing credibility, leverage and posture. As a rule of thumb, begin lease renewal processes 12-18 months in advance of your lease’s expiration, while purchases can begin 12 months in advance. But before approaching your landlord or a building’s seller, first consult with a professional about the ideal timeframe for your situation and the steps you should take before any conversations begin.

Professional Representation

Commercial real estate agents can provide a competitive snapshot of your market. They can offer guidance on location, purchase vs lease comparisons, managing timelines, and more, before even setting foot in a negotiation room. Great agents will negotiate multiple properties in order to give you a side-by-side comparison of what’s available, paramount to any lease or purchase transaction.

For healthcare providers and executives, that professional representation comes at no cost. Commercial landlords and sellers typically agree to pay for an agent’s services on your behalf, which means having a professional by your side won’t cost your organization anything.

More Than Negotiations

The playing field—or negotiating table—is unfortunately not level for healthcare executives. Landlords and sellers negotiate professionally for a living, often with industry experts by their side, which is why commercial real estate agents can save your practice both time and money. If you polled Fortune 500 companies, most either hire professional agents or have a team of in-house professionals trained to maximize every lease or purchase opportunity. Why? Because they’re committed to securing the best possible terms each time.

Whether you're a small business or national corporation, money can be won or lost in every real estate transaction. Your profitability affects your employees, your customers, clients, vendors, and more.

Find a Healthcare Specialist

Find an agent who understands the medical world. Healthcare real estate requires specialized knowledge and experience that is vastly different from common commercial real estate. Many medical practices have unique clinical or technological requirements, and lease specifics (such as signage, parking, access, electrical demand, and HVAC) can affect a practice’s success. Healthcare real estate agents understand medical lending programs and which key concessions can save your practice thousands of dollars.

Your Bottom Line

At the end of the day, the second-largest expense in your practice can be negotiated, and winning on your next commercial real estate transaction has the ability to transform your business.

Colin Carr is CEO of CARR, a commercial real estate services firm for healthcare tenants and buyers.

The views expressed in Perspectives are solely those of the author and do not necessarily reflect the views of Behavioral Healthcare Executive, the Psychiatry & Behavioral Health Learning Network, or other Network authors. Perspectives entries are not medical advice.