Most of the principles of general office lease transactions also apply to medical office lease transactions. However, there are issues unique to medical office users which merit special consideration.
Many medical office tenants have special use requirements. If the business uses hazardous materials or generates biomedical waste or radiation, then the tenant must document these uses in the lease to ensure compliance.
Medical tenants often see patients after normal building hours. Healthcare providers should pay special attention to how the utilities are accounted for after normal building hours to limit excessive utility expenses.
Patients are more likely to have special access needs, and medical office properties are more likely to receive ADA scrutiny. The medical office tenant should make sure its space and property are ADA compliant, paying special attention to the ADA clause in the lease document.
Commercial leases generally provide the landlord the right to enter the space to show the premises, inspect for compliance, and allow access for repairs. Healthcare providers should limit the landlord’s access to examining rooms, patient records, and other areas to protect patient confidentiality.
Owners of a specialty medical practice should seek an exclusive use clause in the lease. An exclusive use lease clause limits the landlord’s ability to lease space within the property to another party whose intended use would be in direct competition with the tenant.
Tenant improvement build-out costs are much higher for medical office users than for general office tenants. Even a modest medical office design costs $40-$60 per square foot due to the extensive plumbing, millwork, private rooms, equipment, and ADA compliance issues. As a result of the higher costs to finish a space, medical office users tend to sign longer leases and relocate less frequently than their general office counterparts. Medical office lease terms tend to be 7 to 10 years, allowing for a larger tenant improvement allowance.
It is critical for the tenant to obtain the right to use its own contractor, design, and construction professionals who are experienced and qualified in medical office construction. Given the scale of the construction costs, the tenant will likely benefit from maintaining control of the management of the design and construction process.
Commercial office leases often contain provisions requiring the tenant to consent to substitute premises should the landlord decide to move the tenant from one suite in the building to another. Given the specialized and expensive build-out of medical office space, medical office tenants should resist these provisions.
For more on medical office space, read my articles “Eight Considerations for Your Medical Office Search” and “5 Medical Office Space Design Ideas to Improve Patient Experience“.
Medical office space is a significant investment for a healthcare provider. Healthcare providers should be sure to retain a knowledgeable real estate adviser to help with site selection and to negotiate a deal which fits the unique needs of the medical office user.
At Golden Group Real Estate, we specialize in tenant representation real estate services for office space users in the Chicago area, helping local business owners find office space and negotiate lease and purchase agreements. We never represent landlords, so we are prepared to negotiate aggressively on behalf of our tenant clients.
For more on Golden Group Real Estate, read about our real estate services. Let us know if we can help you find office space for rent or buildings for sale. Call us at (630) 805-2463, email us at firstname.lastname@example.org, or enter your office space search criteria below.
June 19, 2019
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