by Perry Bacalis, Carr Healthcare Realty
Featured in the July/August 2018 Colorado Medicine.
In today’s economy, maximizing profitability is not just a desire, it's essential for the majority of medical practices to stay in business.
If you own a practice, you most likely have an office. That office carries with it many expenses: the most obvious is the monthly rent or mortgage, which is likely the second highest expense behind payroll. In an effort to cut costs, you may decide to cut staff, but when it comes to payroll, you either pay people what they are valued at, or they go somewhere else.
Real estate however, is 100% negotiable. You can decide if you want to be in an office building, retail center or medical office building. You can decide if you lease or own. You can determine the size, location, and amenities your space will offer. You can choose to be in a stand-alone or multi-tenant building. You can determine the length of lease, concessions you ask for, economic terms, business terms, etc.
So if real estate is your second highest expense behind payroll, and if there are so many options and choices to make when it comes to your office space, how can you maximize the opportunity?
To start, you need to understand that as a healthcare professional, the playing field is not level. You might engage in two to five commercial transactions in your career; whereas most landlords and sellers negotiate professionally for a living. You specialize in your field; they specialize in theirs. If the outcome was based upon understanding medicine or providing a health-related service, you would certainly win.
However, the process and outcome are instead based upon comprehensive real estate market knowledge, authoritative posturing, and negotiation expertise. Winning requires having more options, understanding the correct timing, posture and negotiation tactics that landlords use, and in many cases, being able to withstand the stress and conflict that many landlords and sellers use to exploit unsophisticated tenants and buyers.
Consider the following concepts: If you start the transaction at the wrong time, you lose leverage and posture. If you don’t know the market, you are simply begging or bluffing. If you can’t handle conflict, you will most likely receive even more pressure from the landlord or seller that makes you uncomfortable and forces you into making a decision that you will regret.
Even if you could overcome all of these scenarios, without professional representation you are going to be viewed as a novice and are not going to receive the respect that is necessary to achieve the most favorable terms available to you.
Nearly all landlords and sellers hire or consult with professional commercial real estate brokers to give them even more leverage so they can win. Why? Because they understand what is really on the table when it comes to each negotiation. For them, if they give up unnecessary concessions or go lower on rates than they need to, it costs them tens to hundreds of thousands of dollars of profit per lease. They understand the potential upside or downside involved in every transaction, and they are committed to getting the best possible terms in every transaction.
Most doctors and administrators don’t understand that commissions in commercial real estate are typically paid the same as they are in residential real estate: by the seller or landlord. This means representation does not cost the practice more money. Fees are set aside in advance and are either used to provide each party with representation, or the landlord/seller keeps that money or gives their broker a double commission.
If you are looking to maximize profitability, start by understanding how much is on the line with your lease or mortgage. Then, make the choice to hire representation that is at no cost to you. Select a commercial real estate broker that understands healthcare, only works for you as the tenant or buyer, can help you find the most options, has the strongest game plan, and who can take and absorb the conflict and confrontation that is inherent in every negotiation that involves a lot of money. In doing so you are positioning yourself to win.
The bottom line is there are tens to hundreds of thousands of dollars available to either be won or lost in every commercial real estate transaction; especially with healthcare real estate. Your profitability affects your patients, your staff, your family, and many others. Maximize every commercial real estate opportunity by taking advantage of the best resources available to you. Winning on your next commercial real estate transaction can transform your practice!
Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust Carr to achieve the most favorable terms on their lease and purchase negotiations. Carr’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose Carr to save them a substantial amount of time and money; while ensuring their interests are always first. Email Perry Bacalis at firstname.lastname@example.org to learn more.