Healthcare Real Estate: Identifying and Negotiating The Space For Your Next Dental Office

As a principal architect and director of business development for JoeArchitect, I speak with dentists and dental specialist from all over North America on a daily basis.  Many are just beginning the process of identifying their commercial real estate options for their new dental office.  One of the first questions I ask is “do you have someone representing you through this process.”  There are 3 common responses to this question:

1. Yes, I am working with a commercial broker
2. Yes, I have an attorney
3. No, I am representing myself

Lets address each of these responses starting with no. 3.

3. No, I am representing myself

By far, this is the response I least like to hear.  While the doctor is not typically calling me for real estate advice, I cannot resist providing my unsolicited opinion regarding the importance of proper representation when working through the process of locating and negotiating commercial real estate.  My reasons are partly selfish.  On the occasions when I have worked with a doctor who was negotiating their own deal, I have found that the overall process tends to get drawn-out over a longer period of time.  I have also found that, often, important questions don’t get asked and necessary information falls through the cracks.  This makes sense when you think about it.  Landlords are in the business of negotiating leases.  They understand all of the moving parts and how to structure them to their advantage.  This puts the unrepresented doctor at a distinct disadvantage.  How do you know that your getting a fair deal when you don’t have a grasp of the market.  Not to mention the time involved when working through a complicated negotiation.  In 15 years of working with dentists and designing their offices, I can’t tell you how many times a doctor has said to me “the landlord is really nice and he’s going to work with me.”  That may be true.  He or she is probably a real peach who loves puppies and regularly donates to The Little Sisters of the Poor but, at the end of the day, they want you to pay as much for your space as possible.  That is, quite simply, their business.  Some landlord’s will make the argument that, if brokers are involved, the deal gets more expensive for everyone involved.  Hogwash.  Commercial brokers earn their fees by sharing a split-commission with the lessor or seller’s agent.  You pay them nothing directly.  In my opinion, there is no good reason not to have a broker representing your interests, and your interests alone.

2. Yes, I have an attorney

While, you will certainly want your attorney to review a lease before you execute it, they are typically not in the business of negotiating real estate on your behalf.  It is not an either/or proposition.  You will need an attorney and a commercial real estate broker on your team to properly complete this transaction.

1. Yes, I am working with a commercial broker

Good answer!  That’s what I wanted to hear.  My follow-up question is always “Doctor, how did you meet them?”  If their reply is “through the landlord,” that’s a problem.  If you are working with the landlord’s broker then he/she is not your broker.  He/she is the landlord’s broker and they are working both sides of the table.  How can one broker serve both parties at the same time without it being a conflict.  It’s impossible.  That’s where the term ‘tenant representative’ comes in.  A tenant representative is simply a commercial broker who represents only tenants.  I tell all of my dental clients that, when they are searching for a broker to represent them, be sure to focus your search on brokers that specialize in tenant representation.  Tenant representatives are fairly easy to find in larger cities like Denver but may more difficult to find in smaller towns.  If you are not able to find a tenant representative broker in your area, at the very least, make sure that the broker you engage will be representing you, and you alone, in this particular transaction.  It is also important to note that, in some parts of the country, you can find healthcare specific real estate brokers who specialize in representing doctors, dentists, optometrists, veterinarians, etc…  These niche brokers understand the specific needs of medical facilities such as power and mechanical requirements.  If you’re fortunate enough to live in a place where you can work with a broker who specializes in dental, take advantage of it.  It costs you nothing and will almost certainly save you substantial sums of money both initially and over the life of your practice.

The length of a lease negotiation can vary wildly, from a few weeks to many months depending on a number of factors.  You only have so much control of the process.  Don’t make it any more difficult than it needs to be.  Find a broker in your area that is dedicated to looking out for your best interest and trust them to guide you through the process.

Joe Miller, AIA