With many offices experiencing adjustments to their patient flow, owners and administrators are looking for ways to increase cash flow. One opportunity may be your lease. By effectively restructuring your lease to improve your commercial real estate terms, you could reduce overhead, minimize out of pocket expenses, and drastically improve your bottom-line.
Know your expiration date. Time is valuable when negotiating a lease restructure. If your practice is within eighteen months or less of its renewal options, it is time to act. If you are planning on staying in the space or will consider relocating, having more time equals more power, so don’t let this sneak up on you.
Watch for trends. The current pandemic will affect both the current and future state of the commercial real estate market. When decision making and future planning for your practice, it is important to consider these trends and predictions. With vacancy rates and available properties increasing, landlords are offering aggressive concessions including lower rental rates, lower annual increases, free rent, and tenant improvement allowances. If negotiated correctly, this could be found money for your practice.
In the coming months, we may see owners liquidate assets putting more options on the market. If you have a desire to relocate your current office, expand your practice, or own your space in the near future, now is a good time to start looking for your dream location. If you already own your building, consider possibilities for refinancing debt. Interest rates are lower than ever before.
Evaluate local commercial real estate conditions. Knowing your local real estate landscape provides valuable insight and creates leverage to formulate beneficial lease terms. Without the advantage of data, such as occupancy rates and rental rates, your negotiating power could be in jeopardy before you even start. Access to demographics, competition knowledge, and referral studies can also enhance your practice management and marketing. If you are not sure where to access this information, contact Crown Tenant Advisors to request market intelligence on your current or potential new location. As part of our real estate services, we provide in-depth financial and comparative analyses to be sure you are in the right space and the right market for maximum profitability.
Identify economic and risk factors in your current lease. When restructuring your lease, it’s important to review key clauses that might save you money and mitigate risk to protect your practice today and keep you well-positioned for the future. Depending on your needs, free rent, a lower base rate, or lower annual escalations could improve cash flow. You might be able to put Tenant Improvement dollars from the landlord toward modifying your space. Depending on the type of lease and building, an updated base year should be reviewed.
Language mitigating downside risk and reducing liability associated with the transaction should be included in your lease. Perhaps additional renewal options need to be negotiated or an expired personal guarantee. Maybe there is a redevelopment clause hidden in the previous lease that was not understood. Be sure there is assignment language and subletting language that is favorable to you, the tenant. While these examples of risk factors don’t save immediate dollars, if they aren’t negotiated properly, they could cost you a lot of money down the line.
With each lease renewal, another lease renewal option should be negotiated. With the right advisor on your side, you could literally add thousands of dollars to your bottom-line. For example, by leveraging market changes, Crown Tenant Advisors negotiated a lease restructure that provided savings of over $330,000 for their client.
Hire a healthcare tenant-only advisor. You may have a great relationship with your landlord but be careful disclosing too much information. This can limit your ability to effectively negotiate when renewing or extending your current lease. Remember, it is a business transaction and they are seeking the most amount of profit. Hire a healthcare tenant-only real estate advisor early in the process, who will offer unbiased advice and create leverage to protect your interests and generate the most savings. Similar to a buyer’s agent in the residential market, a tenant-only broker is compensated by the landlord or owner. That means, there is no out of pocket cost for the advantages of their representation.
A healthcare practice has unique requirements and specifications, that differ from other tenants, which must be considered in structuring your lease. Look for a real estate broker who specializes in healthcare and has expertise in the unique needs of your industry.
These extraordinary times may provide extraordinary opportunities for your practice. We are here to help.
If you are considering renegotiating your existing lease (or even if you are not), contact Crown Tenant Advisors to request a FREE lease review. We will look for hidden opportunities to save you money, address potential risk, and aggressively negotiate on your behalf. We have experience with the specific needs of healthcare practices and will provide unbiased advice with no conflict of interest. Even if your renewal options are over 2 years out, contact us today to assess your current situation and discuss a strategy for renegotiating when the time comes. We are, also, available to discuss your business goals and how we can help with your plans for the future.
About the Author:
Andrew Riepe is President and Owner of Crown Tenant Advisors, a boutique healthcare real estate firm. Andrew has spent his entire commercial real estate career focused exclusively on representing the interests of healthcare providers and has a comprehensive understanding of the unique requirements of dental, medical, and veterinary tenants and buyers. He utilizes a strategic approach to real estate. His expertise lies in providing market knowledge and in-depth financial and comparative analyses to achieve optimum results.
About Crown Tenant Advisors:
Crown Tenant Advisors, Inc. is a regionally based boutique healthcare real estate firm headquartered in Georgia, with additional offices in Tennessee, Alabama, North Carolina, South Carolina, Northern Florida, and Indiana. Within these markets, Crown Tenant Advisors is a proven leader in medical, dental, and veterinary tenant and buyer representation. Crown Tenant Advisors conducts demographic reports, market surveys, and analysis to negotiate favorable real estate terms. By exclusively representing healthcare providers in real estate transactions, Crown Tenant Advisors has a comprehensive understanding of their unique requirements and offers unbiased and unconflicted advice to protect their clients’ interests, save them significant money, and mitigate their risk.
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