South Florida Hospital News | Medical Office Space Market Trends: Why Lease When You Can Buy?

As featured in South Florida Hospital News:

As you search for the best commercial property for your practice you may ask yourself whether you would be better off owning or leasing. Lesley Sheinberg, Director at NAI/Merin Hunter Codman, who specializes in medical site facilitation, has experienced a shifting trend towards purchasing medical office buildings versus leasing space. She notes, “More and more established practices and collective groups of private physicians are realizing the benefit of owning a building far outweigh leasing space from a landlord, as the potential for long term cost savings and financial gain is great.”

As mortgage and rent payments are often very similar, the pros and cons of purchasing versus leasing must be weighed. There are primary benefits to both, the primary benefit of purchasing is your ability to own an asset of increased value at the end of the mortgage term, while reaping the tax benefits over the duration of the loan. However, some medical practices desire the ability to relocate, downsize or expand at the end of a relatively short lease term. To know if purchasing is right for your practice, evaluate your long-term goals and take into consideration the three factors below.

1. The Investment: When leasing, the upfront costs are typically the first month’s rent, security deposit and tenant improvements specific to the medical industry. Medical space upgrades often include additional electrical, plumbing, shielding and ADA compliance improvements. At times, these costly upgrades can be covered in a well negotiated lease. If purchasing, upfront costs can be higher due to down payments, appraisal costs, loan fees, inspections and property upgrades. Each practice should evaluate their upfront investment abilities to decide which option falls in line with their goals.

2. The Space: What may work for you now might not in a few years depending upon your practice’s growth potential. Newer practices may be better suited for leasing until they get a handle on their long-term square footage and location requirements. Established practices know their client numbers and benefit from staying several years at one location. Additionally, if they purchase a building larger than their immediate need requires, leasing out the extra space can produce income, until they need the space for their own.

3. The Budget: When you purchase a building, fixed and variable cost factors can be controlled to some extent. When leasing, you are subject to the market climate changes and annual cost increases imposed by landlords.
If your practice is ready to move forward with leasing or investing in commercial property, the very first step is to ensure you have a seasoned commercial real estate professional with your best interest in mind.

NAI/Merin Hunter Codman’s medical space expert, Lesley Sheinberg places investors and tenants on an even playing field with commercial real estate professionals, landlords and owners, utilizing her medical site selection expertise and superior negotiation skills. If you need a broker who specializes in your field, call Lesley today at (561) 471-8000 or (561) 254-7810.

NAI/Merin Hunter Codman, Inc. is Palm Beach County’s leading commercial real estate services firm, with over three decades of experience advising on strategic acquisitions, dispositions, leasing and comprehensive property management. We advise on all commercial property sectors, from office and industrial to retail, multifamily and land. Our client base includes some of the most prestigious institutional and private investors in the world. NAI/Merin Hunter Codman is headquartered in West Palm Beach with regional offices throughout Palm Beach County. Where can we help you next? Call (561) 471-8000.