This Commercial Real Estate Market Trend Could Affect Your Healthcare Practice (In a Good Way!)

As we start 2021, we continue to monitor an important commercial real estate trend: Negative Net Absorption.

Commercial Real Estate Optimization

What does it mean? Negative Net Absorption simply means an increase in the vacancy rate of commercial buildings compared to the leased space. In other words, demand for space has decreased relative to supply. When you drive around your community you might see it. Some retail stores are either consolidating or going out of business. Some real estate owners are looking to liquidate. The pandemic continues to play a significant role in redefining how businesses operate with many employees working from home now and into the foreseeable future.

What does it mean for our clients? Potentially more premium space options and more negotiating power with motivated landlords willing to make higher concessions including lower rental rates, added tenant improvement allowances, and extra free rent.

What does it mean for your healthcare practice? If you are thinking of starting your own practice, expanding or relocating your existing practice, or considering purchasing land or a building, now is your moment. Even though the middle of a pandemic may not seem like the best time to make a change, with the current state of the commercial real estate market, now is actually an excellent time. Even in periods of uncertainty, the need for healthcare remains constant. Landlords know healthcare practices are strong stable tenants.

We recently worked with a client in metro-Atlanta who was looking to relocate. She was interested in a space in a medical building owned by a retail developer. This was the only medical building in their portfolio, and they were nervous about what was happening in their retail centers. We were able to negotiate a deal for $4/square feet less than they were asking three years ago when the space was new. Other concessions, including free rent and a tenant improvement allowance, along with the reduction in base rent equaled savings for our doctor of over $105,000.

Your practice might have experienced a disruption in cash flow as a result of the pandemic. If you own your real estate, you could explore refinancing with record low interest rates. If you lease your space, there are concessions that could be negotiated with a new lease renewal such as free rent, lower base rent, lower lease escalations, or tenant improvement dollars. Even if you have no desire to move locations, these concessions could be achieved during the lease renewal period. Now more than ever, your lease could provide a significant opportunity to positively impact your practice’s profitability. Contact us to request a FREE lease review. We will assess your current situation and offer unbiased advice to help you save money and address potential risks.

Regardless of your goals, it’s never too soon to start planning. We suggest allocating at least 18-24 months when possible. This allows time to gather local market intelligence, including competition and referral studies and demographic information. This important insight can be leveraged to help choose your perfect location and negotiate the most favorable terms. If you are leasing, be sure you know your expiration date. Don’t let this important deadline sneak up on you. If you are less than two years from the end of your lease, you should start your renegotiation now. View our lease expiration flowchart to see some of the steps involved in a typical lease renewal and learn why we say the more time you have, the more leverage you have.

We know there is barely enough time to see all your patients, much less think about real estate. Let us partner with you to take this off your plate. There are no costs for our services. We are here to help! Contact us for a FREE consultation. You receive all the benefits of our expertise and exclusive representation at no cost to you.