Five Things To Remember When You Have A Lease Coming Up For Renewal

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  1. Give yourself enough TIME prior to expiration.
  2. Consider several ALTERNATIVES to your current space.
  3. THINK LONG TERM as well as short term.
  4. REVIEW the LEASE DOCUMENT even if you renew.
  5. Use the renewal or relocation as a time to RETHINK OFFICE OPERATION.

 

  1. GIVE YOURSELF ENOUGH TIME PRIOR TO EXPIRATION.

Make sure that you start the process early enough so that you will have enough time to properly evaluate alternatives. Don’t short change your practice by allowing too little time. As with anything else it is always better to have more time. If you start too early you can always slow down but if you start too late the advantage goes to the Landlord which you don’t want to do. What is enough time? To figure this out in your particular situation estimate how much time each component of the process from the initial search for alternatives, to lease negotiation and finally buildout will take. In the case of a 5,000 sf lease space you should figure on 30 days to determine what options are available. It is a good idea to find five or six options which might work. Figure another 30 days to work thru those options which would included doing test fits on the top two or three options. Efficiencies differ between different buildings and floorplates.

  1. CONSIDER ALTERNATIVES TO YOUR CURRENT SPACE.

Take the time or hire a professional medical office broker to find a reasonable number of alternatives. After identifying five or six possibilities tour the buildings paying particular attention to such thing as visual appeal of the building ingress and egress to and from the building, the total number of parking spaces available in the building (4 spaces per 1,000 square feet of leased area is a minimum however ideally you would like 5 or 5 per 1,000. Parking is the silent killer of a practice. If there aren’t enough spaces patients will be late for their appointment, they will be upset at having to drive around looking for a space and upset because they were harassed by staff for being late to the appointment. Many times they won’t complain but just not come back. Once you have toured the options and made notes send out a request for proposal (RFP) to each option telling them what information you want. The idea behind an RFP is to get identical information from each option so that you can make an apples to apples comparison. Buildings will naturally try to give you information in a way that makes their property look good but if they are successful that makes the job of comparing them much more difficult. Once you receive the proposals from the options you will want to put the competing buildings on a spreadsheet and compare them both in terms of their economics and the more subjective issues such as appearance, ingress/egress and parking.

  1. THINK LONG TERM RATHER THAN JUST SHORT TERM.

Concurrently with the RFPs you will want to do test fits with the best two or three options. This will tell you how each option actually lays out and how efficient they are relative to one another. In doing a test fit and looking at a long-term design for your space you will certainly want to think about the things which currently work in your space and those things that don’t. Do you have the right number of exam rooms? Does the reception area have enough seating?  Does the office still flow efficiently? What worked well for the practice five or ten years ago may not work now. Offices are generally designed along one of two ways. The “pod concept” where the exam rooms serving a particular doctor, the doctor’s office and the doctors nurse or nurses are all bunched together in a pod. The other concept “non grouped” which seems to be regaining favor in the current changing medical environment is to have all of the exams together with the nurses station and have the doctors all together apart from the exams, using charting stations interspersed among the exam rooms. This concept allows more flexibility in assigning different numbers of exam rooms to different providers which may be a function of the patient load or how a particular provider works.

  1. REVIEW THE LEASE DOCUMENT EVEN IF YOU RENEW.

A year before your lease comes up it is a good idea to get out your lease and review it to refresh your memory on what the sequence of events will be regarding the renewal of your lease. Are there any renewal options specified in the lease? This will usually be spelled out in the Special Stipulations section of the lease. If there are options how long before renewal do you need to give notice of your intent to renew. What in addition to the ability to renew does the renewal option describe such as a specific renewal rate or other items which are specified and have been pre-negotiated. An option only grants your practice the right to renew not the obligation. You will want to look at the market to determine if the renewal option is advantageous for your practice. If the renewal option is clearly advantageous then it may make sense to look at alternative spaces and begin the process of negotiating between the options to determine the best avenue for the practice.

  1. USE THE RENEWAL AS TIME TO RETHINK OFFICE OPERATION.

During the process of considering a renewal it is a good idea to take a global look at the operation of the practice, and not just as it relates to the office space. Since a renewal may not involve additional square footage many practices just sign the renewal amendment and move on. However, a renewal marks three, five or even ten years since you have seriously looked at provisions in your lease. As you know there have been significant changes in the healthcare system which have had an effect on how your practice operates and possibly how your office space should function. Also with a renewal or relocation you should not just look how things effect your practice today but rather you should be looking at your needs 2, 3 or 5 years down the road.

In considering your long term needs you should consider such things as whether your phone system continues to be adequate for the operation of the practice. You might consider whether your computer system adequate for the demands of the practice in 2017 and beyond. There will be a range of issues which will be specific to your practice.

The bottom line on how to address an upcoming renewal is that you should begin early, take a careful look at whether your current space is adequate for your needs today thru the end of the renewal term, and use the anniversary to consider things that relate to your office space and maybe a few larger issues that relate to the practice. Good luck. If you don’t have the time to do an adequate job, consider hiring a real estate professional to take on some of the time consuming aspects.

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