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7 Factors to Consider When Leasing or Buying Medical Office Space

Just as you consider patients' needs on an individual basis, think carefully about your practice's unique needs and circumstances when it comes to real estate.

The medical office space you choose is a major factor in the financial health of your practice. As you weigh the long- and short-term implications of various real estate options, one question that invariably arises is whether it's wiser to buy or lease medical office space.

Of course, the answer depends on a variety of elements, including available space, market conditions and expected growth. Just as you consider patients' needs on an individual basis, think carefully about your medical practice's unique needs and circumstances.

Following are 7 factors to consider when leasing medical office space.

Medical Office Space Factor #1: Autonomy

Along with the responsibility of running a private medical practice comes the reward of being your own boss. Make sure the medical office space you select doesn't become a financial constraint on your operational freedom, whether by tying up too much capital or locking you into restrictive lease terms. One perk of ownership is the ability to remodel, make improvements or bring in new equipment without having to seek permission from an owner or landlord.

Medical Office Space Factor #2: Longevity

How long do you plan to have your medical office in the proposed location? Owning commercial real estate can beef up your retirement fund — if you give it enough time to appreciate. If a relocation in the next five years is likely, leasing is probably a safer bet.

Medical Office Space Factor #3: Flexibility

A lease offers flexibility should you decide to relocate in the future. Ownership, on the other hand, can provide flexibility for medical office expansion without relocation; it may allow you to add on or grow into previously rented space.

Medical Office Space Factor #4: Taxes

The tax implications of leasing compared to purchasing medical office space are significant and complex. Seek input from an accountant and an attorney on how to maximize tax savings as you establish your practice.

Medical Office Space Factor #5: Opportunity Cost

Buying commercial real estate often requires greater upfront costs than leasing space. What return would you expect on your purchase and how does that compare to the expected return on investing the money back into your business? As you weigh the opportunity cost, don’t forget to factor in opportunities for rental income if you purchase a medical office space.

Medical Office Space Factor #6: Cost Control

When you buy office space, you stay in control of your long-term real estate costs. With leasing, you are at the mercy of market fluctuations in real estate rent.

Medical Office Space Factor #7: Property Management

Most doctors have neither the time nor the expertise to manage real estate. If you choose to become a landlord, you should budget for a commercial property manager to handle leases, tenant improvements and administrative work. A property manager will cost you a small percentage of cash flow but save you invaluable time to focus on what you do best.

Once you set goals, establish objectives, gather information, and run the numbers for your medical practice, seek out professionals to help you realize your entrepreneurial dreams.

Medical professionals aspiring to start their own practice, acquire a current one, or build or buy their building can receive support for their venture through the Practice Pathways program.

Practice Pathways focuses on lending to entrepreneurial dentists, veterinarians, optometrists, physicians and pharmacists. With Practice Pathways, a designated relationship manager is the sole point-of-contact and provides specialized expertise on a full suite of financial services.

For more information or to submit a Practice Pathways application, call 888-588-6265.