Real-Life Guide to Medical Office Space Leasing in NYC
(CLICK HERE TO DOWNLOAD GUIDES IN PDF)
Table of Contents
2. Evaluation of Your Requirements
3. Medical Office Space Search
4. Offer and Counteroffer
5. Negotiating and Closing
6. Construction / Buildout
7. You Are In Business!
Dear Doctor (Can I just call you Doc?),
If you are reading these lines, then you are probably looking to lease or buy a medical office space in New York City for your healthcare practice, correct? You are in the right place! Medical office space leasing and sales in NYC is our specialty – this is what we do! Our brokers have helped hundreds of healthcare professionals in New York to find new homes for their businesses; but, please, don’t take it from us - take it from your colleagues by reading their Testimonials on this website.
OK, Doc, now we’ve established that you are entertaining the idea of opening your new medical office in NYC. What’s next? Obviously, you are eager to jump right into the game: “Hey, I want to see all these great offices out there!” So, you go online (who is looking for offices in newspapers these days anyway?!) and start calling all these attractive classified ads that start with words “Amazing medical office for rent...” What happens next? Your excitement gradually evaporates when you hear: “I’m sorry it’s rented…”, “It’s off the market…”, “I’m not sure which one you are calling me about…”, “The landlord won’t take your use…”, “We have 2 offers on it…” Pretty soon you realize that there’s a lot of garbage ads out there, and you need a professional realtor with a deep knowledge of inventory and a proven track records of done deals who will assist you in finding the office that you are looking for. Just imagine a patient who desperately needs a serious surgery, but, instead of going to a doctor, she tries to self cure herself with over-the-counter drugs: we don’t even want to think about that outcome…
Hence, if you are really looking for the best medical office spaces in NYC for lease or sale, expect favorable FOR YOU deal terms, and don’t want to waste your precious time; then, please, call MedicalOfficeNYC.com without hesitation. If your “good-to-go” office exists - we’ll find it; if it doesn’t – we’ll create it! We guarantee you a top-tier representation and it will cost you… nothing! The vast majority of our listings are “NO FEE!” We hope that you will enjoy this quick NYC medical office leasing guide and check our “GUIDE TO MEDICAL OFFICE SPACE BUILDOUT IN 100 IMAGES”, and be ready for commercial office space leasing in New York City! Buckle up!
2. Evaluation of Your Requirements
So, Doc, now that you are ready to take this big step towards your new office, do you have a clear understanding of what you are trying to achieve? Can you visualize your future office? These are just some of the requirements that your broker needs to understand before he/she even starts the search.
What’s your ideal location? Are you just starting out or relocating? How do you commute? How do your patients commute? Will you lose patients if you move too far away from your current location? Who is your target audience? Is it a must to be close to a hospital or major train hub?
How large is your practice? Do you know how many rentable square feet you require? Are you familiar with the “loss factor”? Do you need room for growth?
What’s your ideal layout? How many treatment rooms do you need? How many offices? How large does your waiting area with reception have to be? Do you need a private bathroom, special procedure rooms, lab area, X-ray room? How large are your treatment rooms: are they 9’x10’, 10’x12’, 11’x14’? How many windows would you like to have? What about natural light and views?
Budget is extremely important. What is your comfortable budget? What would you like to pay per month? Per rentable square foot? Have you factored in charges for utilities: electricity, water, sprinkler, etc.? Are you aware of fixed annual rent increases? Real Estate Tax escalation over the Base Year? CPI escalation? Porter’s Wage escalation? Other surcharges? Remember: there’s always more than just the base rent – demand full disclosure from your broker!
Length of Lease
What’s the length of the lease that you are willing to sign? Is it short-term or long-term? Will you be expanding in 5 years? In 10? Are you investing a substantial sum of money into the buildout? How a potential relocation will affect your business in the future? As a rule of thumb – the longer lease you can sign, the better deal you can get.
Do you know what kind of building is good for your practice? Do you need to be in a super high-end Class A building, or would you rather get some extra footage in a good quality Class B building? Do you need to be in a medical office building? Are you restricted by a “non-compete” agreement? Do you require 24/7 access, uniformed lobby attendant, full ADA compliance?
What lease options are really important for you? Option to sublease? Option to assign your lease? Option to terminate your lease under certain circumstances? Option to extend your lease at either fixed or fair market price? Option to upsize or downsize within the landlord’s portfolio? Any other options?
Does your practice require any special plumbing? Are there any wet columns in your space? Is it possible to bring water into the space? Will you use pumps or gravity to drain water? How much will the plumbing cost? Who will be paying for it?
There are dozens of other items that your broker must understand and verify in order to find you the perfect space and not waste anyone’s time by offering you properties that will just not be suitable for your practice.
3. Medical Office Space Search
Let’s talk about the medical office space search for a minute. Is it easy or is it hard? Can you just go online and find your new office by yourself? Einstein’s probability theory says “Maybe you can!”; the same theory also doesn’t rule out that (maybe) you can win a Mega-Gazillion Lottery! How many times have you won so far?
It is our conviction that you will end up in a better office and with better lease terms if you use a professional real estate broker. In fact, we are not talking about that “good guy who sold me my condo in Brooklyn” or that “friend of a friend who is working for some building owners and specializes in representing landlords”, but we are talking about a full-time commercial real estate broker who not only specializes in representing tenants, but also understands how medical office space leasing in New York City is different from generic office space leasing. Your real estate broker must also be passionate about real estate, positive, and energetic.
Some tenants mistakenly think that if they don’t hire a broker and go directly to landlord representatives, they will get better deals. What they don’t realize is that landlord brokers have a fiduciary responsibility to their clients (landlords) to deliver the best deals possible for them - not for you! They can lure you with a slightly-better-than-the-asking price or some free rent, but will you really be getting the best deal possible? How will you know what could have been and whether you’ve left money on the table? Here’s a true story about a client who was looking for an office in Midtown. She called us and was in rush to get a new office for her medical practice. We discussed her requirements and offered her an ideal office space for her business right by Central Park. The asking rent was $65/rsf. The client told us that she had already seen the space by herself and even had a lease out on it (but the real
fell through). The landlord agreed to give her $63/rsf and 1 month free. Had she created any value for herself by not hiring a broker? Absolutely not! Our firm had closed over a dozen deals in the building in a 6-month period, and the deals that our clients were getting were in the mid-to-high $50’s per rentable square foot with 5-6 months of free rent (concession) – but how would the clients know where the landlord’s bottom line is? The comps for leases are very valuable – commercial leases (unlike residential sales) are not publicly recorded, and only a handful of brokerages can consistently deliver the best results possible. We are proud to be one of them!
When your broker is searching for your space, it’s very important that he truly understands the market and shares your vision. Finding the right medical office space must be your #1 priority. Your entire business and the well-being of your family may be affected by your choice. It’s not only about being convenient and presentable, but also about ADA-compliance, rules and regulations, zoning, certificate of occupancy, etc. The perfect-looking space may not be so perfect with a bad management or a one-sided lease, and your second or third choice can become your ideal solution if the lease gives you some important options such as sublease, assignment, sharing, termination, extension, limited guarantees, upsizing or downsizing, selling your business with the lease, and many other options as well.
Finally, Doc, your office is your second home – just make sure that it’s not only functional, but also gives you both a good vibe and moral satisfaction – you must feel good and be comfortable there!
4. Offer and Counteroffer
So, Doc, now, after checking almost a dozen offices, you are down to 2 or 3 that are approved by you, your business partner, your spouse, your 3-year old, and everyone else who was involved in the decision making. Are you ready to put an offer? Which of the offices is your top choice? Which deal does make sense? What does your gut feeling tell you?
The first thing that you need to do is to discuss with your broker the business terms that you will be offering. It’s both art and science to submit a fair proposal that creates maximum value for you in the long run and, at the same time, is not aggressive to the point where the landlord will be insulted and will either not counter at all, or counter just as aggressively with a “take it or leave it” connotation. While you want the best deal for yourself, you also don’t want to start off the relationship with your future landlord on the wrong foot - another reason why you need a good middle man who knows how to handle these situations. We do it every day and know how to create win-win solutions! It’s a mistake to think that a monthly rent amount is the most important variable in real estate deals. Most NYC landlords care more about your use, financial stability, and length of your lease than about the maximum amount of dollars that they can potentially squeeze out of you.
Now, the offer is in – when will the landlord respond? Will it be accepted? If the offer is not at full asking price, you can rest assured that the landlord will send you a counteroffer that will not match your offer on all points. That’s why you need to offer a little bit lower than where you are targeting to end up. Whatever terms you offer – landlords will likely counter them. If you offer $1,000, they will come back with $1,100; if you offer $1,100, they will come back with $1,200. If your broker knows all buildings, all
landlords, and the market well, he will help you figure out the right terms for the initial proposal. Remember, Doc, your offers are non-binding, so, don’t be shy to send them to landlords as soon as you like something. You can always back out, but it’s always important to be the first in line. Very often landlords work on a “first come first served” basis - you snooze you lose!
Is it a good idea to send multiple offers? First of all, when you are sending an offer, you will have to support it with some confidential information: corporate or personal tax returns, bank statements, reference letters, etc. So, it may be a good idea to send multiple offers only if you are equally interested in several spaces and plan to base your decision on the financial analysis of counter-terms. Otherwise, it’s advisable to send offers one at a time. Normally landlords respond within days or even hours, and you will know pretty quickly whether you have a deal or not. If the counteroffer is unacceptable and the landlord is stubborn, then you should definitely move on to the next best option without delays. It’s a taboo to send multiple offers for different spaces to the same landlord. If you do this, it may send said landlord a signal that you are not that serious and just shopping around. Are you sending offers to everyone? Said landlord will not be very motivated to deal with you and may not give you his best counteroffer. Show landlords that you mean business, and they will do whatever it takes to bring you to their buildings. They need you more than they show!
5. Negotiating and Closing
Negotiations, Doc, are like a chess match: let the games begin! A knowledgeable broker knows the range of deal terms for each building even before showing spaces to his clients. If your broker just did three leases with a certain landlord at $40/rsf, why won’t he be able to do it again for a similar space, even if the listed asking rent is $45/rsf? Obviously, there are some other factors that can influence the price (such as market trends, location dynamics, building’s vacancy rate) – but, in general, you and your broker will know which deal is good and which one is bad. Negotiating a fair lease is our goal and fiduciary responsibility to you (the tenant), and we are always doing the right thing for you: that’s why we have so many satisfied clients and done deals under our belt.
Can you, as a prospective tenant, help your broker in negotiations? Absolutely! You and your broker are a team, and you need to give your broker some trump cards to fight for a good deal: solid business tax returns, bank statements, reference letters, certificates, licenses, a good-looking website – everything will make a difference. When landlords see financially stable tenants, they are inclined to give these tenants better deals. It is your broker’s direct responsibility to present your case to the landlord in the best light possible, explain to them why you will be a great fit for their building, arrange a reasonable security deposit, negotiate significant concessions (free rent, work letter), and make the landlord want you in their building just as badly as you want to be in it. Our brokers always fight till the end and win – we are happy only when you are happy!
Closing. Now, after a few rounds of going back-and-forth, you and your future landlord have a meeting of minds. The landlord sends you the lease for the winning space. Do you just sign it? It’s probably not a great idea to sign any commercial lease without first showing it to your lawyer. It’s very important that your lawyer understands commercial leasing and knows how to comment on an office lease. You don’t go to a dentist for an eye exam, do you? Similarly, you need a good real estate lawyer who will focus only on crucial points and send the landlord’s attorney only about 10-15 comments for approval – no more. Some lawyers (and I don’t want to offend any of them) make hundreds of comments most of which are irrelevant. Many landlords will kill your deal if you try to rewrite their leases, and some of them will take time to review the comments and, in the best case scenario, accept 50% of them (for example, approving the word “reasonable” in front of every paragraph); but things that are really important and, God forbid something happens, can protect you in the future – these things may be overlooked and lost in a huge pile of comments.
Can you save a few bucks and ask your broker to read the lease for you and give you legal advice? Absolutely NOT! The New York Real Estate Law strictly prohibits brokers from giving any legal advice – regardless of how many deals they’ve closed or how smart they are. Real estate brokers are dealmakers – they want you to sign on the dotted line – they are bias! If you ask a broker for such advice, there’s a risk that he will just say “Hey, this is a simple and standard lease, just sign it!”; and then, a few years later, you may be in trouble when you realize that a certain issue should have been discussed with a real estate lawyer and incorporated into the lease before you signed it. Brokers are responsible only for business terms, not legal terms!
6. Construction / Buildout
Congratulations, Doc! You have just signed your lease! But before the Grand Opening your space needs to be built: are you ready?The construction phase of medical office buildouts varies immensely, but there are a few rules of thumb. Sometimes you are lucky and can utilize most of the existing layout, and sometimes you have to start with a full demolition and build everything from scratch. When your broker negotiates your deal, one of the most important items that he must discuss in detail is the construction. Who will be responsible for the buildout: you or your landlord? Who will build what? Who will pay for a new HVAC and ductwork and who will pay for plumbing? Who will pay for hardwood floors and glass panels, and who will pay for soundproof walls and ADA-compliant private bathrooms? Every little construction detail must be agreed upon before you sign your lease. A good broker will always get some construction contribution from the landlord in the form of a free rent, better monthly rate, work letter, construction itself, or a combination of some of the above.
If your landlord does the construction, he will probably commit to so called “basic standard” that can includes demolition, sheetrock walls, electrical work, HVAC system with ductwork, paint, carpet, ceiling tiles, etc. If you want above standard fixtures: special plumbing, chandeliers or track lights, real hardwood floors, soundproof walls, dedicated electrical lines with non-standard voltages – then you will likely have to absorb the cost of these upgrades. If you do the construction yourself, then you will have to bring your licensed and insured contractors and receive landlord’s “blessing” for your plans. If the amount of work involves significant alterations to the space, you may be required to obtain mandatory permits from the Department of Buildings. Professional contractors and architects know how to file for these permits and know which ones are required in each instance. Typical medical office space construction takes between 6 and 12 weeks depending on the size of the office, amount of work, and contractor’s availability.
Do I have to use union contractors? Some buildings will allow you to use only union contractors and some buildings will be OK with contractors who are licensed and insured, but not necessarily union. Non-union contractors are (on average) less expensive and much faster.
How much will it cost me to build my office? It really depends on the amount of work and how high-end it needs to be. We’ve seen it all – from a few thousand for minor cosmetic renovations to hundreds of thousands for state-of-the-art medical centers built from scratch. Please, check our “GUIDE TO MEDICAL OFFICE SPACE BUILDOUT IN 100 IMAGES”: it shows you step-by-step images of the actual medical office space construction for a family doctor where the landlord had contributed $45 per rentable square foot to build the entire space, and the tenant had paid for the above standard fixtures: all plumbing (7 sinks and private bathroom), hardwood floors, and a frosted-glass wall in the reception area. The total cost of this buildout was about $85,000. It was mostly covered and fully built by the landlord.
7. You Are In Business!
Doc, we’ve made it! We’ve evaluated your requirements, found your space, put several offers in, analyzed counteroffers, negotiated hard and picked the best option, signed the lease, developed architectural plans, reviewed bids from contractors, completed the construction, installed cabinets, bought furniture and equipment… What a ride! Isn’t it great that you had this great
real estate broker by your side who made this ride so easy, enjoyable, and fun!
Now it’s time to concentrate on your business. Your fully executed lease agreement goes into your safe and, for as long as you pay your rent on time, you won’t need it. You just went through the entire leasing process and saw a much bigger picture of medical office space leasing in Manhattan. You’ve learned about the “loss factor” and “option to upsize”, about “good guy clause” and “sub metered electricity charge”. Now you understand how to lease a commercial office space in NYC and have some peace of mind that your deal is the best one in today’s market! Ah, what the heck – by the power vested in us by… ourselves, we hereby declare you an honorary real estate guru! (And if you want to change careers and become a true real estate broker, you will have to take a special real estate course and get your license from the Department of State!)
Your office is an extremely important element of your business – it’s the face of it! Other important elements are your partners, good marketing, online reviews, referral networks, business skills, professional attitude, and just being very good at what you do for a living.
What about your future? We are confident that you will prosper in your new office, but you will have to work hard and be dedicated! It’s New York City, Doc – it’s very competitive here, but very rewarding at the same time! It’s just like Frank Sinatra sang: “If I can make it there, I’ll make it anywhere! It’s up to you New York, New York!” These words are spot on, Doc!
Should you have any real estate needs down the road – our brokerage is always standing by! Whether you need to sublease a part of your office space, assign the entire lease, buy another medical practice, open another location, upsize within your building, or restructure your entire real estate portfolio - we are always here to help!
Doc, it’s impossible to squeeze the entire medical office leasing process into one small guide, but there is no need to! This guide was designed just to give you a taste of how commercial real estate in New York City works, and why you need to find a good broker who will act with your interests in mind and knows what he is doing.
Each leasing transaction is an equation that consists of dozens of variables: from business ones to emotional ones. Each deal is unique. No two spaces are exactly the same.
MedicalOfficeNYC.com is a website that was designed for healthcare professionals like yourself. It is associated with a Manhattan-based licensed commercial real estate brokerage VIZA Group Inc. Our brokers have access to every building and every space in New York City. Multiply that by our strong relationships with NYC landlords and decades of experience in NYC medical office space leasing and sales. It’s absolutely risk free for you to work with our brokerage plus the vast majority of our listings (and we have thousands of them) are “NO FEE”!
Are you ready to start today?
Please, contact us at 212.235.2000 or MedicalOffice@VizaGroup.com
Thank you for reading!
Your referrals will be highly appreciated!