Real Estate Decision making
Securing space to practice is one of the most important decisions of your career; you want to be sure you have weighed all the risks and benefits of whether to buy, lease, or sublease your practice location and operating room. OBS Credentialing will inform, educate and guide you through the process to the decision that is right for your practice.
A myriad of factors come into consideration when making the decision to rent, buy or sublease a medical office. An analysis of your practice will determine where you want to locate; the patient catchment area, the demographics and insurance mix. Proximity to hospitals and public transportation may also be significant factors to consider.
Buying vs Leasing
While it may appear there are several advantages to buying your office space, such as long term appreciation and equity growth, leasing can be a much safer option particularly if you anticipate a ‘short term’ stay in that location. It is critical to understand the timeline of your practice, your risk tolerance, your ability to make a down payment, and the local market conditions.
Buying Medical Office Space
Buying ensures long term stability, but that long term stability may also come with limited flexibility. You may not have the space to bring on new associates or partners. You may not be able to easily sell your space if relocating is a goal. It is important to also understand that for Physicians, a real estate investment is in the same ‘risk basket’ as their professional risk: several ‘unforeseens’ such as illness, loss of a partner or tenant can potentially have a profound financial impact on the practice.
As an owner, you will also have to anticipate how to manage the day in and day out details of keeping your ‘physical plant’ in top running order, compliant and adequately outfitted for your practice requirements:
- HVAC and plumbing
- Electrical risers for lasers and other medical equipment and fixtures
- Elevator and doorway restrictions for the operating room accreditation
- Compliance with ADA requirements on any renovation plans
- Compliance with accreditation agencies
When to Buy Medical office space
Conventional thinking suggests that if you are planning on at least 10 to 15 years of active medical practice then buying may be the best option. Medical office space is usually considered ‘recession resistant’ because of the medical sector’s ability to withstand economic downturns. Additionally, the aggressive acquisition of medical office space by private equity and local hospitals has driven down vacancies and boosted selling and leasing prices.
Leasing Medical office space
It is not necessarily true that costs are higher for leasing over longer periods compared to purchasing.
Leasing typically has the advantage of significantly lower costs in the early years, but that can change if a practice remains in a location long enough. It is important to have a financial professional project the total costs over time, including tax implications, in order to understand the practice’s break-even points.
Buying or Leasing Medical office space in a NYC Co-op
Preparing a NYC coop board package purchase application is the most difficult step in buying a New York City co-op. The financial and personal documentation requirements of a co-op board are much stricter than just getting a mortgage.
Purchasers are expected to provide a ‘board package”. The purpose of the board package is to show the co-op board that you are a qualified buyer. The disclosures required are notorious for being excessive and intrusive. There will be scrutiny of your tax returns and financial statements, and you will have to provide personal and professional recommendations.
In addition to financial information and reference letters, the co-op application may require two years of tax returns, financial statements that show assets and income, specifically tax returns and bank statements, a written insurance quote or active insurance policy on space you are not even approved to buy yet and reference letters. The amount of documentation and records required by most co-op boards can often require the services of professionals who specialize in ‘co-op board packages’.
Most co-op boards have a 50% minimum down payment requirement. They also look at credit scores and liquidity as a way of excluding anyone who is not able to pay the common charge. Co-op boards may have legacy biases and favor one medical specialty over another. Their decision making can be entirely arbitrary and not subject to challenge. Most medical office space for sale in New York City is in co-op buildings, so it is essential to be able to work with co-op rules and requirements.
The co-op will generally have strict rules about:
- Use of the lobby entrance
- Office hours
- Noise
- Medical waste
- Number of patients
- Ability to do surgical procedures
There is very limited availability of leases for medical space in NYC co-op buildings; primarily because co-op boards do not allow it. There is also another reason; most medical space co-op owners (Physicians) do not like the idea of diluting their brands by bringing in other providers.
It is very rare to find an owner who wants to vacate (but not sell) and sublease their space. The co-op board would have to approve the tenant and the building bylaws would have to permit subleasing. In the event that leased space is available, the co-op board may put limitations on the number of years the space can be leased.
Daily Operating Room Rentals
If your surgical practice does not yet support the investment of building or buying an OBS, you may want to consider scheduling cases in an Article 28 surgical center, or rent time in an established OBS that is not fully scheduled.
While most owners of OBS would rather add surgeons than rent, many have significant, predictable times when their OR is not utilized.
OBS Credentialing has strong relationships with Surgeons who have daily rentals available in Manhattan. We will ensure that the location is right for you; the rental structure meets your criteria (ad hoc rental or regular ‘days of the week’ rental) all equipment and supply needs are met, the necessary credentialing is executed, and that the facility is properly built out and fully accredited
Commercial space for Medical practices
Condo medical spaces available for purchase are VERY rare in NYC; they are much more prevalent in non-metropolitan areas and suburbs. There are many medical-only buildings with a large number of other providers, but these come with a greater risk of losing patients, they are usually highly commercial, and not conducive to boutique branding. Commercial office space in class A or B buildings usually will not allow patients, they are usually high traffic, high volume buildings.
