What to Expect When Looking for a Medical Office Space


Hospital Treatment Room

Chicago is the third largest city in the United States, which means there is a deep pool of potential medical spaces to fit just about any practice. Prior to beginning the search for new space, many of our health care clients are interested to know what exactly is involved in the process. Through our experience we’ve assembled a list of the most important steps involved along with tips and tricks we think will help these doctors.

Timeline

Aim for a minimum of nine months before you’re ready to lease or purchase a space. Keep in mind that at least six months worth of time is essential to account for site selection, business term negotiations, attorney review, architectural design, permitting and any interior construction or design work to fit your specific medical office needs. 

The Search

A tenant representative will start with a survey of the market to deliver relevant property options that fit your specifications in terms of a budget, location, type, size and quality of a space.

In addition to the standard software that all CRE firms use, Tenant Advisory Group has established a network of resources to efficiently uncover both newly on- and off-market listings that will increase the quality of your search.

Assuming a budget of a certain amount per month, desired medical office size, building class and neighborhood proximity to transportation are all variables that can be adjusted to stay within your means.

After you’ve selected a list of properties of interest, a tenant representative will organize tours of all potential buildings, helping to guide you through considering all the logistical factors involved with each space.

One great way to get the most out of your dollar is to consider reducing both the number of private offices and reducing the size of the exam rooms to reduce the square foot per capita. However, if individual offices and larger exam rooms work better for your type of practice, and you are not looking to compromise on size, then shifting from a Class A to a Class B building can still maintain relative quality building finishes with amenities while substantially reducing rental rates.

Business Term Negotiations

Once the list is narrowed down to a handful of properties that seem like a potential fit, the next step is to submit RFPs that seek to achieve all of your goals, both financial and in terms of space quality and layout.

Even if you’ve chosen one property for your top choice, seeking proposals from multiple properties will provide you with market comparables to facilitate more negotiating leverage.

In addition to appropriate rental rates, a tenant representative broker will understand terms and be an advocate for you to achieve fair market concession packages such as rent abatement; tenant improvement allowances; escalations; securitizations; rights to expand or renew; and termination rights.  Working with a tenant representative who possesses a deep knowledge of fair market values will be indispensable to this process and overall cost savings.

Upon receiving proposals, a broker will run analyses to outlay the financial impact of the Landlord’s response and will submit counters to advance the negotiations toward your goals until acceptable business terms are agreed upon.

If there is a need for a build out, this will also be the time that a tenant representative will coordinate efforts of an architect to design the space to your specifications. A space planner might be provided from the building, particularly if they will turnkey the work, or an independent architect may be involved.

One thing to keep in mind during the negotiation process is to organize your paperwork. Prior to signing a Letter of Intent with a particular property, the landlord is most likely going to require you to show them financial statements and/or the last two years of your tax returns to be assured that you will be able to pay your rent in a timely and stable manner.

Attorney Review

Once both sides have come to agreement on the key business terms, a tenant representative will coordinate the attorney review process. The will work alongside your attorney to ensure the legal language reflects the negotiated terms.

If your practice does not have an attorney you use that specializes in real estate, Tenant Advisory Group is available as a referral source to qualified and affordable real estate attorneys.

Navigating Construction

Upon lease signing, Tenant Advisory Group will continue to assist with coordinating walk-throughs of the space for meetings with the architect and contractor bidding. We will be there to track progress against the project completion dates to make sure everything and everyone is moving forward efficiently.

Tenant Advisory Group is also available to make introductions to quality furniture vendors, movers, phone & data brokers, IT vendors, insurance brokers, and other ancillary professionals to help facilitate the process.

Moving Checklist

  • Receive quotes from several movers and line up a company well in advance
  • Line up the phone and data broker to set up the phone and data lines so they are ready by the time you move
  • Contact your IT support and let them know about the move at least six months in advance, but no later than 90 days
  • Recycle or donate unwanted electronics and furniture
  • Consider meeting with a furniture vendor to decide on reusing existing furniture, purchasing new or purchasing refurbished furniture
  • Gather any necessary paperwork for potential tax write-offs
  • Obtain a copy of the building rules and regulations
  • Identify the best point of contact from the building for all moving-related, space buildout and daily space operations questions
  • Understand the acceptable moving procedures in terms of hours, parking, unloading and elevator access
  • Establish a packing schedule to determine what can be packed in advance or last minute to reduce disruption to productivity
  • Setup mail forwarding from your old address
  • Order stationery, business cards and envelopes with the new address printed on them
  • Change your mailing address on your practice registration with the city, website, social media, Google, credit cards, bank accounts and other professional and medical organizations
  • Notify your network of clients and vendors that your practice has a new space and address to proactively avoid any interruptions in productivity

Why Use a Tenant Representative

The tenant does not pay any commission for the brokerage services they receive. The services are paid by the landlord. Even if the tenant negotiates direct, the landlord still pays a commission to its in-house brokers. Shouldn’t you have an experienced advocate on your side, too?

An attorney can negotiate legal terms, but typically does not have sufficient micro-knowledge of the changing local real estate market conditions to ensure you receive favorable business terms.

Tenant Advisory Group has established a network of trustworthy, qualified and affordable real estate-adjacent professionals to incorporate into the transaction, in order to fully service all of our client’s needs.  

Tenant Advisory Group is committed to bringing best-in-class commercial real estate services to every end user, and proudly saves our clients an average of $15,000 per person on leasing costs and over 20% on purchases.

Bill Himmelstein Featured on the Success Hackers Podcast!


Scott Hansen of Success Hackers sat down to speak with Tenant Advisory Group’s owner, Bill Himmelstein, to discuss Bill’s success. You can listen to the entire podcast here.

Lisa Kalous was Named a 2016 Top Producer!


The Chicago Association of REALTORS has named Lisa Kalous as a 2016 Top Producer! Tenant Advisory Group is proud to work with such a talented and caring realtor. Congratulations, Lisa!

Below are a few words from Lisa on receiving the honor:

“I couldn’t have achieved this without your support, referrals and trust,” said Lisa Kalous. “I’m incredibly grateful for you! As always, If you’re thinking of making some changes this year–from making a move to planning renovations–I hope you’ll reach out for my advice and resources. I’m always ready to help and love hearing from you.”

Commercial Real Estate Broker Dual Representation


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Did you find the perfect office space and are ready to sign a lease or make a purchase? Are you trying to move your property quickly? If you’re involved in any leasing/purchasing real estate process it’s likely you’ve come across the term “dual representation.”

What is Dual Representation?

Dual agency representation occurs when the same broker or firm represents both the landlord and tenant in the same transaction. It’s not uncommon to find this happening when big firms are involved in the process. While it might seem like an ideal solution at the time, it’s often problematic and can cause more headaches during the transaction.

Picture an attorney in a courtroom, representing a defendant client and also attempting to represent the prosecution during a dispute in court. Hard to imagine, right?

Dual Representation: Two Birds, One Stone Mentality

As with the above example, it’s not possible to represent both parties fairly in dual representation commercial (or residential) real estate transactions. There are too many conflicts of interest, and in the end, it gives an unfair advantage to the brokers/firms as it majorly affects the sales price.

For instance, as it’s pointed out in this WSJ.com article, depending on the timing of the transaction, “having an agent represent both the buyer and the seller can either raise or reduce the final selling price of a transaction.” It should also be mentioned that the agent typically makes far more money representing the landlord than they do the tenant – so what’s the incentive there? Some food for thought.

Rather than negotiating a deal that’s good for the broker, an agent should always negotiate a good deal for their client. This is why firms that represent tenants only (as opposed to firms that do both) are ideal for leasing/purchasing as this prevents any potential conflict of interest and helps to ensure the client’ best interests are being served.

Dual representation is illegal in many states. In my opinion, it should not be allowed, period. While a few states still allow dual representation, the good news is that most of them have passed laws (just like this one) that require both brokers and agents to disclose this information. These laws are a great step to help continue to protect buyers and tenants.

Final Thoughts & Tips:

If you find yourself entering into a leasing or purchasing transaction, every potential tenant should hire a broker/firm that doesn’t have any conflict of interest with a landlord/leasing agent. Hire an experienced broker who only has your interests in mind – it’ll save you time, money and your sanity.

Every real estate transaction is different. If you suspect dual representation is occurring, speak up. Always clarify your relationship with your agent. Don’t be afraid to ask for a listing agreement or an exclusive buyer agency agreement. Both are great ways to help ensure you’re being represented, fairly.

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Sources:

Tanaka, Sanette. Wall Street Journal. (2014, January 23) How a Dual Agent Affects Sale Prices. Retrieved from http://www.wsj.com/articles/SB10001424052702304757004579334860673874146

Bill Himmelstein Interviews on Meet Advisors


Tenant Qualification


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As a tenant broker we are the proverbial parent and our clients, the tenants, are our children. We want to ensure that they’re safe, warm, and well protected with a strong roof over their heads and an even stronger lease. Just like a student applying to a college that will check their credentials and qualifications, we must qualify our clients as well.
This allows us to get to know them better and to better understand their financial situation. The most important thing in qualifying a new client will be the financials.

Very simply, a landlord should be viewed similarly to a bank. The landlord is going to invest significant funds into a transaction. Like a bank, the landlord wants to know that they are lending (in the form of tenant improvement dollars, free rent and leasing commissions) to a financially stable company able to pay the rent. Many people are under the impression that leasing commercial space is like leasing an apartment- as long as they have good credit they will be in good shape. The main difference is that that rent for an apartment is typically far less expensive than the rent for office space. The landlord cares far more about whether they have growing revenue streams, a strong balance sheet, or have been a stable business for a long time. Having good credit provides no guarantee to a landlord that the tenant can pay the rent every month and on time.

Landlords, like banks, want to see income, profitability, cash flow, or at a minimum, financial backing. Without an operating history, without positive cash flow and/or a strong balance sheet, or without a large cash balance in a bank account, a landlord will be reluctant to enter into a lease with that business.

Another important qualification question is: does the potential client have an accountant, an attorney and an existing banking relationship? Having these relationships signifies a robust company where others have invested their time.

For more information on client qualification, contact Bill Himmelstein by email at Bill@tenantadgrp.com