Things to Remember When You Have a Lease Coming Up for Renewal

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THINGS TO REMEMBER prior to a lease renewal.
1. Create or have a LEASE ABSTACT prepared at lease expiration.
2. Give yourself TIME prior to expiration.
3. Consider ALTERNATIVES to your current space.
4. THINK LONG TERM as well as short term.
5. REVIEW the LEASE DOCUMENT even if you renew.
6. Use the renewal or relocation as a time to RETHINK OFFICE OPERATION.

LEASE EXPIRATION STARTS AT THE LEASE EXECUTION.
Planning for your next lease expiration starts early at the execution of the lease. Shortly
after lease execution you should prepare or have a professional prepare a lease abstract. A
lease abstract is synopsis of the most significant terms of the lease including information
on any expansion and renewal options. The information on expansion options will
include the notice that must be given the renewal option and the terms which were agreed
to in the original lease. Use this document as reference for your path as you approach
lease expiration.

GIVE YOURSELF TIME PRIOR TO LEASE EXPIRATION.
Make sure that you start the process early enough so that you will have enough time to
properly evaluate alternatives prior to any notice which must be given for a renewal
option, which is included in the original lease. Don’t create a scenario where you have
too little time to do a proper evaluation all of your available alternatives. As with
anything else, it is always better to have too much as opposed to too little time. If you
start too early you can always slow down but if you start too late the advantage goes to
the Landlord, which is never a good idea. How much time is enough? To figure this out
in your particular situation, estimate how much time you realistically need for each
component of the search, taking into account that this will not be your only activity.
There will need to be 1) time to review your lease abstract to determine the terms
available in your current lease, 2) time to look at the market and assemble good
alternatives, 3) time to tour those alternatives, 4) time to request and receive proposals,
5) time for lease negotiation and 6) time for any buildout, which might be required either
at your current space or at another building of your choosing. In the case of a 5,000 sf
lease space, you should figure on 30 days to review your lease abstract and determine
what options are available. It is a good idea to find five or six options which might work.
Allow a minimum of 30 days to work thru those options which would include doing test
fits on the top two or three options. Efficiencies differ between different buildings and
floorplates.

CONSIDER ALTERNATIVES TO YOUR CURRENT SPACE.
Take the time or hire a professional medical office broker to find a reasonable number of
alternatives. Once you have identified five or six possibilities, tour those alternatives
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 (minimum 4 spaces per 1,000 square feet of leased area but ideally 5 or 5 per
1,000). Parking is the silent killer of a practice. If there aren’t enough spaces it will cause
patients to be late for their appointment, it will create angst on their part as they drive
around looking for a space, further aggravated as they are harassed by staff for being late
to the appointment. They may not complain to the practice but just not come back. Once
you have toured the options, made notes on what you have seen to keep the details of the
alternatives straight. Send out requests for proposal (RFPs) to each, 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. Remember that despite your
best efforts landlords will always respond in such a way as to accentuate the positive and
minimize the negative aspects of their property. To the extent they are successful, this
makes the job of comparing alternatives 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.

THINK LONG TERM RATHER THAN JUST SHORT TERM.
Concurrent with requesting RFPs you will want to do test fits with the best two or three
options. This will allow you to compare layouts, highlighting their relative efficiencies.
In commissioning a test fit look long term, considering the things which currently work
in your space and those things that don’t. Think long term. Consider the number of exam
rooms? Consider the seating in the reception area. Have the practice consider whether it
wishes to use a “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; or the
concept which seems to be more favored in the current changing medical environment
which is to have all of the exam rooms together with the nurses station and have the
doctors all together apart from the exams, using charting stations interspersed among the
exam rooms.

REVIEW THE LEASE DOCUMENT EVEN IF YOU ARE GOING TO RENEW.
Many practices are content to just sign an amendment renewing their existing lease
without looking back at the original lease. You should always review your existing lease
to become reacquainted with what was agreed 3, 5 or even 10 years earlier. The times are
always a changing, healthcare has changed and will continue to change. Your practice’s
situation has most likely also changed in those intervening years. Management may also
have changed and the direction and focus of new management may be different. For all
these reasons you need to review the original lease with a lawyer and or a real estate
professional to determine how your current space may address the current objectives and
focus.

USE THE RENEWAL, RELOCATION OR SEARCH FOR A SATELLITE
OFFICE AS A TIME RETHINK YOUR OFFICE OPERATION.
In the case of a satellite certainly, but even in a renewal your office staff may have
grown. This becomes a good opportunity or even a necessity to review aspects of practice
operation. You may decide to tackle this on your own but as you know there are a variety
of vendors who are positioned to look at the various aspects of such a review.

Submitted by Stan Sharp, HealthOne Realty Advisors

ssharp@healthonerealty.com

www.healthonerealty.com

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