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Most people are smart enough to seek their doctor’s expertise when they are not feeling well. However, not all doctors or medical groups will utilize the skills of a commercial realtor when they need to find suitable space for a new clinic or relocation of an existing physician practice. This decision can prove to be expensive. For more than twenty years I have observed numerous areas where costly mistakes could have been avoided if an expert had been utilized on the front end. One of the most prevalent source of struggle and lost time to physicians is the area of commercial real estate.

Jon Albright is a partner with Investec Realty Services. “Most of the larger medical practices utilize someone who is an expert in the commercial real estate field.” The cost of leasing or owning real estate is an important and often significant part of the practice expense category.

“Many smaller groups or single location physicians don’t realize that they can hire a commercial broker whose sole responsibility is to find suitable locations for the practice and negotiate the most favorable terms.”

Many physicians feel they are saving money by searching for and securing real estate locations for their practices on their own. They choose to handle this task by calling landlords after hours, on their days off or delegating the duties to an administrator, their spouses or even a nurse. However, going it alone doesn’t necessarily bypass broker fees. In most cases, such fees are factored into a property regardless of whether or not a real estate professional was used.

Most of us would agree that it is not wise for individuals to perform medical self-diagnosis for a variety of reasons. Without having someone to represent your position in real estate negotiations, you will never know whether you were able to secure the best possible deal or fully understand all of the terms and financial commitments that are part of the lease or sale you are contemplating. It makes good business sense to have your interests in potential property dealings represented by a real estate professional.

Owners, landlords and their agents are responsible for getting the best deal for their property and not ensuring that the physicians they lease or sell to get an equitable deal. Larger companies rely on experts to assemble the preliminary options and associated preliminary costs and physicians should as well.

Selecting a Realtor or real estate firm that has a proven track record of successfully representing their clients’ interests will prove to be a valuable asset to any staff member within the physician practice, which ultimately affects your ability to manage practice costs.

Additional services can include market knowledge about properties, discounts, determining all costs associated with the lease or purchase of a particular location, and negotiable terms that will prove to be valuable. In some cases important contacts in the construction, architectural, engineering, financial and legal fields can be obtained via the association with your commercial broker.

Unfortunately, according to Albright, “I am brought into discussions many times to correct mistakes that were made before my initial involvement, which usually means the subleasing, attempted renegotiation or sale of a property which proves to be costly and takes additional hours of the physicians or administrators time which could have been better spent elsewhere.”

It is important to engage the right person to represent your interests. There are several key areas to consider when selecting this individual. These areas include: experience, references, and professional designations (Realtor, CCIM, and SIOR). It is also important to know who will be handling the day-to-day communications with you or your delegated point person, who can filter interruptions that take away from your valuable time.

The Medical Group Management Association has standards that many practices use as guidelines in the annual cost survey, which includes real estate costs. As a manager and consultant to many of the physicians in this community, I frequently use experts in areas such as real estate, which I am not involved with on a regular basis. Many consultants do not have the expertise in areas such as real estate, pension planning, and many other areas but attempt to represent that they do, which is not in the best interests of the physician and the practice. I have seen numerous instances where physicians were given or interpreted information incorrectly which cost them in both the long and short term.

Selecting the right person or firm and properly communicating your needs and expectations are vital components to a successful real estate experience. The benefits and advantages of a professional to represent you in the beginning far outweighs the costs and headaches that can frequently occur later.

Bill Appling is principal of J William Appling and Associates LLC, a physician management and consulting group here in Memphis.




May 2008

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