Planning a New Medical Office Space

Robert I. Freedman, Esq

April 13, 2007

Step 1: Locating and Planning the Medical Office Space

Office Location

Health professionals must take many factors into consideration when deciding to open a medical office. In real estate it is said that the 3 most important considerations are location, location, and location, so let's start with that. You should plan on it taking 6 months to over a year for this process -- about half of that time to find the place and the other half for renovation.^[1,2]

If you already have an existing practice, the location needs to be convenient to patients. It helps to take a local map or print out the appropriate section from an online mapping program, such as Google maps (https://maps.google.com/maps) or MapQuest (https://www.mapquest.com/). Draw a circle (or semblance of a circle) on the map circumscribing as many of the residences of your patients as possible. The ideal location is in the center of that circle. However, one must also take into account other factors, such as the availability of parking for suburban and rural practices, and the proximity of public transportation for urban practices. If you will be spending a good deal of your time in a hospital, proximity to that hospital will be important. It might also be prudent if you receive referrals from other physicians to consider locating in a medical office suite.

Office Size

The next consideration is size. How large of an office do you need? Space is measured in square feet. A rule of thumb for the size of a practice facility is 1200 to 1500 square feet for the first physician and 1000 to 1200 square feet for each additional physician up to 4 or 5.^[1] Certain professional suites, such as those for psychiatrists, have less need for space. Some practices may require additional space for equipment, such as x-ray or other imaging equipment.

Renovation

Renovation is another important factor. To hit your mark(et), aim carefully. The goal for most physicians is to represent their practice well, at the best value for the money. First, consider your patient base and the image you want to project to those patients. Physicians who are running a clinic, for example, do not require an upmarket location and costly furnishings. If you want your space to be more upscale, consider hiring an architect.^[1]

The next step is to consider the condition of the premises and the cost of adapting it for the intended use. Renovation might consist of no more than fresh paint, new carpeting, and changing the pictures on the wall or it might require a total makeover. First, decide on the number and size of rooms, their layout, appropriate electric service, plumbing, and HVC (heat, ventilation, and air conditioning). If walls need to be moved and electricity installed, these are considered capital improvements (Figure 1).

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Cite this: Planning a New Medical Office Space - Medscape - Apr 16, 2007.

Step 1: Locating and Planning the Medical Office Space
Purchasing a Medical Suite
References
Sidebar: Renting Space on Your Terms

Sidebar: Renting Space on Your Terms

Doctors Tom, Dick, and Harriet had been practicing together for 10 years. Their initial lease for 10 years was expiring, and they had outgrown their space. Who would have dreamed medical records could take up so much space? So, on the recommendation of friends, they went to see Broker Bob. They learned that Broker Bob had represented other medical practices and had familiarity with physician needs.

At the first meeting with Broker Bob, he asked what rental range they felt comfortable paying and additional questions about their practice: Where are your patients located? Do you drive to work (parking then being a factor) or do you take public transportation (proximity to bus or train stops would be important)?

After the initial meeting, Broker Bob went out to survey spaces, which saved physicians' time. Broker Bob found 3 medical suites that seemed to meet the their needs. He brought each one to the space, and then met with them together to discuss the factors they would need to know in making a decision. During that meeting, the physicians learned many things about real estate.

Asking vs Final Rental Price. The rental price given for each space was the asking amount, not necessarily the final price. So, Broker Bob agreed to negotiate on their 2 favorite premises, and succeeded in achieving a much lower rent for one location than the other.

Rentable vs Usable Space. Although both spaces were advertised at 2300 square feet, they were not comparable in size. There can be a large difference between rentable square feet and useable square feet. In one suite they were paying for a good deal more common area (elevators, lobby, hallways, restrooms) than in another space.

Variable Utility Costs. The cost of utilities can be greater in 1 facility than another, even given equal space. For example, in 1 location they would be paying an electric bill based on a meter reading; in the other, the cost was an add-on to their rent based on square-footage.

Costs Associated with Cost of Living. Fourth, the doctors learned that future escalations in taxes and cost of living were likely to be greater in 1 space than in the other.

Eagerness to Rent. Finally, Broker Bob let them know that 1 landlord was more anxious to rent than the other, and that the eager landlord would give them 4 months free rent -- more than enough time to make the modifications to the space that needed to be done before they moved in.

So, what started out as a difficult decision between 2 spaces that had equal rents and appeared to be the same size became an easy decision once Broker Bob differentiated the spaces based on factors that were not obviously apparent. Recognizing these differences had a very positive effect on the practice's bottom line.

Cartoons by Ron Barrett. Reproduction and/or republication of this material by permission only. For further information about this article and Morrow CME publications, please contact info@cmorrow.com and visit www.cmorrow.com/cme.html. Copyright 2006 Charles Morrow Productions LLC.

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