Commercial real estate comes in many forms, including medical space. Many people are currently flocking to buy medical buildings for one major reason: the future of the traditional office space is uncertain, since so many companies have decided to let their employees work remotely as a result of the pandemic. However, not every medical building is worth buying. If you’re thinking about purchasing a medical space, here are six things to consider before doing so.
1. Location
The old phrase “location, location, location” holds true no matter what kind of real estate investment you’re considering. Just as you wouldn’t expect a large pool of tenants to lease a house in a tiny town with a declining population, you shouldn’t expect a flood of healthcare providers rushing to lease a medical building in a location where there might not be enough patients to even warrant a medical office. Study the location and the demographics before making your move. Is the population on the rise, or declining? Is there a large number of Baby Boomers who need easy access to healthcare providers? It’s all about supply and demand.
2. Projected income & appreciation
You might find a great deal on a medical office and be tempted to jump in before another buyer beats you to it. However, there are important calculations that need to be done before any purchase is made. For instance, how much rent can you expect to receive each month? It’s all well and good to find a cheap deal, but if the rent is also cheap, it might not be a wise purchase. And while you can’t forecast the future regarding appreciation, you can at least make an educated hypothesis about the building’s potential moving forward.
3. Practicalities
The property might look great to you, but you need to consider if it’s going to look great to your tenants and their patients. For instance, if there’s not enough parking to accommodate staff and patients, there’s going to be a problem. Other problems could include a waiting room that’s too small or inadequate space for administration needs, lab work, or imaging technologies. Or perhaps the building is located on a road that’s so busy that patients complain about how long it takes to turn into the parking lot. Ask yourself whether the office would suit the needs of the average healthcare provider, and if you would be happy spending time in that office as a patient.
4. Track record
Do your research so you can see what the medical space has been used for in the past, how long the previous tenants stayed, and why they left. If there’s a track record of tenants moving to another property every time a lease runs out, then there’s a serious problem. A little bit of investigation goes a long way. Ask questions to the seller, and ask for disclosures and records including past rent rolls.
5. Potential zoning issues
You’ll want to make sure the city or county government doesn’t have stringent rules regarding how the property can be used. It’s always wise for an investor to keep their options open regarding how to use a space, so they can evolve with the needs of the community. Once you’re informed about the local laws and ordinances, you can decide whether you’re okay with any barriers that exist.
6. The benefits of a commercial property manager
Once you’ve purchased the building, it will need to be managed. Hiring a professional property manager is the best way to do this, as they know exactly how to approach every problem and come up with the best solution. They also know the local market, which is invaluable when it comes to setting rent prices and finding quality tenants.
Here at Kronos, we are extremely knowledgable when it comes to managing medical buildings. Our owner, Christy Mickel, has more than 15 years of experience in the property management field, overseeing healthcare facilities, retail stores, government facilities, Class A and B offices, and more.
If you own a medical building in the San Diego area, Kronos would love the opportunity to win your business. Give us a call today at 619-488-7870 or 858-956-5983.
