Real estate decisions significantly influence your practice's value and marketability. Through our experience guiding healthcare practice transitions, we've identified three key real estate factors that buyers evaluate carefully.
Location: The Foundation of Value
Location quality can sometimes override other practice metrics in attracting buyers. A prime location offers immediate competitive advantages—high visibility, convenient access, and strong demographics all contribute to future growth potential. We've seen this firsthand: practices in premium locations often command higher valuations, regardless of current performance metrics.
Consider a recent transition we managed where location became the deciding factor. Despite operational challenges, the practice's position near major retail anchors and strong demographic indicators attracted multiple qualified buyers. Within three months of purchase, the new owner reported exceeding their initial performance projections, validating the location's strategic value.
Lease Terms: Building Long-Term Value
Your lease terms directly impact both current operations and future sale opportunities. While many focus solely on base rent, successful negotiations must address several key components:
- Base rent and operating expenses
- Tenant improvement allowances
- Rent abatement periods
- Landlord responsibilities
- Assignment rights
- Lease length and renewal options
- Operating expense structure
- Maintenance responsibilities
- Future expansion rights
- Assignment and sublease rights
Strategic lease negotiations can provide significant value through reduced overhead, improved cash flow, and enhanced practice marketability. For example, securing a substantial tenant improvement allowance not only reduces your initial investment but also provides capital that can be redirected toward practice growth or operational improvements.
Exclusivity: Protecting Market Share
Exclusivity clauses protect your practice's value by limiting competitive threats within your immediate area. Without proper exclusivity provisions, your potential buyer pool could be limited if competitors move into adjacent spaces. This is particularly important for practices offering multiple service lines or planning future expansion.
For instance, a general practice without exclusivity protections might find their buyer pool significantly reduced if specialty providers move into the same complex. These restrictions should extend beyond direct competitors to include businesses that might conflict with your patient demographic or practice image.
Making Informed Real Estate Decisions
Whether you're establishing a new location or evaluating your current space, these real estate factors significantly impact your practice's long-term value. Understanding how location, lease terms, and exclusivity affect your practice's marketability can help you make decisions that enhance rather than limit future opportunities.
Need help evaluating your practice's real estate situation? Contact us for a confidential consultation to discuss how your real estate choices affect your practice's value.
