10 Tips for Renting Medical Office Space

Renting a medical office is one of the most important steps to setting up your own practice. The location of the office, the type of space and amenities it includes, and the amount you pay in rent will have a big impact on the success of your practice. Therefore, it is essential that you do your research and you are thorough in your search for just the right office space.

Here are 10 tips for finding the right medical office to rent in Scottsdale:

1. Determine Average Rates in the Area

How will you know if you’ve found a good deal or not if you don’t know how much the average medical space for lease costs? You need to shop around a bit and get a good understanding of how much medical office space rents for on average. Typically, rents for medical office space will be quoted as rent per square foot per year. So a rate of $24.00 means $24.00 per square foot per year.

Some may quote a monthly rental price for a specific space, so you’ll want to make sure that you convert all pricing to the same units of rent per square foot per year so that you can compare apples to apples.

2. Understand the Difference between Rentable and Useable Square Footage

Say you find a nice office space that has 2,000 square feet, and you see that the rate is $24 per square foot. You get an annual rate of $48,000, or about $4,000 per month. What you might not realize is that the 2,000 square feet that you’re paying rent on do not equate to the actual square footage you’ll have use of inside your suite. There is always a difference between “rentable” square footage and “useable” square footage. This difference is typically called the “building load factor.” A building load factor is the percentage of the total square footage of a building that is taken up in common area spaces such as lobby, atriums, stairwells, elevators, storage rooms, electrical rooms, etc. This percentage can range from a low of 5% for single tenant, ground floor buildings with exterior entrances to a high of 15% to 20% for multi-story, multi-tenant office buildings. Ask the broker or property manager of each building what their building load factor is so you can compare among your options. A high load factor isn’t necessarily a bad thing, it often comes with more common area amenities, it just means you’ll be paying for your pro-rata share of them in your rent.

3. Understand What Additional Fees You’ll Pay Besides Your Rent

Your monthly rent is not the only thing you’ll pay for your office space. Most leases are what are known as “triple net” leases, or NNN leases. That means that in addition to your rent you’ll also pay your pro-rata share of the building’s property taxes, insurance, maintenance costs, management costs and repair fees. A triple net lease also means you will pay for your own electricity bill as well that will be billed directly to you from the electric utility provider. A “modified gross” lease typically means that your rent includes many of the costs not included in a NNN lease, but you’ll still pay for your own electricity and janitorial. Every modified gross lease is a little different as far as which expenses are included in rent and which aren’t, so ask your broker or property manager to put in writing any additional fees not included in your rent. Finally a “Full Service Gross” lease typically means that your rent includes all other expenses, including electricity and sometimes janitorial. So in comparing your options, you’ll want to do your best to compare “apples-to-apples” which typically means converting all rates to total occupancy costs per square foot. Total occupancy cost per square foot is how much you’ll be paying per square foot when all the fees are included.

4. Ask about an Improvement Allowance

Some property owners will provide a tenant improvement allowance when you sign a lease. The allowance can be used to modify the space for your needs. Find out if an improvement allowance is included in the quoted rental rate and how much it is. Otherwise, you will be on the hook for whatever improvements you need to make. Often the amount of improvement allowance the landlord will offer will depend on several things, including the condition and age of any existing build-out, the length of the term you are willing to sign a lease for, the rental amount and the credit or personal guarantee strength of the entity or individual signing the lease.

5. Ask If the Space is Accessible

As a doctor, you will likely see people who are disabled or who have some mobility issues. Any space you are considering leasing should be fully accessible by everyone. Otherwise, you will have to pay a lot of money to make it accessible, and that should be included in your cost configurations.

6. Find Out About Biohazard Waste

Most medical office uses need to deal with biohazard waste and you’ll want to make sure that the building is setup to handle that. Find out if the space you are considering renting will be able to accommodate that waste. Many office spaces that are setup as Executive Suites will not be setup to handle medical biohazard waste.

7. Check on After-Hours Access and Heating/Cooling

You might have a patient who needs you after hours. Will the office be available to you and to the patient? You need to find this out before you sign the lease. You will likely have access, but you’ll want to check with the building standard hours for heating and cooling if you are signing a Full Service Gross lease where utilities are included in your rent. When this is the case, buildings will have established hours of operation for heating and cooling and may or may not have the ability to have heating and cooling beyond their set hours. If they do have the ability, it will most likely come as an additional “after hours” utility charge which is often a fixed dollar amount per hour. Check with the property manager or broker to find this out and read your lease carefully to make sure you understand that what is said is also accurately put in writing.

8. Check on Security

You will be handling sensitive personal data in your medical practice. You need a space that offers the appropriate security. Find out what security is available and what you can add where needed. Again, these are things you need to know first and need to negotiate if something is not available.

9. Learn about Parking

Where is parking for your employees? Your patients? Is it close enough to the building? Is it safe? These are all questions you’ll need to ask. The more difficult it is for patients to find parking, the harder it will be for you to attract new patients. You’ll either need to negotiate for more parking, or you’ll need to offer incentives for your patients, such as paying for their parking for them.

10. Consider Medical Office Sharing

A professional Scottsdale medical office for rent can be a significant part of your monthly overhead. Make sure you use these tips to find the perfect space for your needs. Otherwise, you could end up trapped in a lease for a space that doesn’t provide what you need for your business and that eats away at your profits at the same time.

If your space needs are on the smaller side (typically 1,500 SF or less) it is very difficult to find a professional space that will meet your needs without having to take on more space than you really need. This is a common dilemma for medical practices that only need a small amount of space or only need space on a less than full-time basis. Until recently, small office needs have had to either 1) lease more space than they need and then have to try to sublease their excess space to others or 2) sublease space from others who have leased more space than they need. Neither of these options are optimal and often lead to friction between the two parties.