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Herbal Explorations

Real (Estate) Opportunities for Clinic Owners

Due to the tough economic conditions, it is important to examine all areas that can improve the bottom line. One of the key areas that you can realize huge potential savings in is by reviewing your real estate commitments for your clinic.

Leasing

Whether you are currently leasing or looking to lease a space for a clinic, this is an excellent time to be in the market. There are some incredible values on the market as lease rates are down in most areas; however, do not focus solely on getting the lowest lease rates possible. Consider instead what your business needs in order to get your clinic up and running successfully. For some, it will be important to get free rent, for others, tenant improvements/buildouts will be essential to conserve capital, and for others it might be concessions in both of the aforementioned areas. Do not be afraid to be aggressive – ask for what you need and be open to discussing a variety of options with your landlord. Be prepared to consider longer lease terms in exchange for these concessions.

If you are currently leasing, many owners are open to renegotiating your existing lease given today´s economic conditions. Just as banks are reworking the loans that they issued, landlords are renegotiating their leases, especially if you can demonstrate financial difficulties because some income is better than no income to them. Some landlords might reduce your rent, while others may delay when the payment is due, or some perhaps may offer a combination of the two. Even if your business is better than ever, you can ask your landlord for concessions such as landlord improvements to the space that would allow you to be more competitive. They are more likely to agree to the things that you ask for now because of the tough economic conditions that have led to a lot of vacancies and availabilities in the leasing market in most areas.

Buying

Despite the horrible economic conditions, this may be the best time to buy a space in which to develop your practice because a confluence of (1) low prices (2) low commercial interest rates and (3) sba loans. Prices are low because (1) the number of spaces available (2) banks are no longer lending based on projections, rather looking at cash flow and (3) many people are afraid to make long term commitments due to this economy. But for many health care practitioners, having a clinic space is a fixed cost (you need to work somewhere) and have a history of cash flow to support a loan. So, if your lease is up or you are ready for a move, you should do a lease versus buy analysis, which you will compare the cost of leasing to the cost of owning (mortgage payment minus tax savings). Another factor you should consider when you are doing this analysis is where lease rates may be in the future – perhaps they are due to increase or decrease.

Whether you are leasing or buying, there is an opportunity to realize savings in one of your biggest fixed costs, your clinic space. Talk to your real estate agent about how you can take advantage of this and reduce your overhead, making your practice more competitive and reducing your burden.