5 Steps to Developing Your Medical Office Real Estate
The healthcare industry is rapidly growing and there are no signs of it slowing anytime soon. With an ongoing pandemic and an aging population that’s expected to double the costs of Medicare and Medicaid costs by 2030, there is a lot of work to be done in healthcare.
To put it lightly, working in the healthcare industry during the past two years has been challenging, but the business side is still a wise investment. According to an article from Forbes, titled Profitability in the Health Care Market Has Never Been Better which uses Florida as a litmus test, South Florida hospitals reported average profit margins of 8% in 2018, their highest in recent years. It’s not just in South Florida either, there are signs of an expanding market everywhere. Patient care alone accounts for $1.068 trillion in 2021 and in 2018, the healthcare sector was worth $8.45 trillion, with an annual growth rate of 7.3% since 2014.
If you’re a medical practitioner who is ready to move onto the next phase of your career and into the business side of your practice, there is no better time than now. Here is what to consider when thinking about scaling your practice and developing your medical office real estate portfolio.
Determining Financial Solutions for your Medical Office Development
At Ashton Gray, when medical practitioners come to us with plans of developing medical office real estate, the most common question we’re asked is “Can I afford this?”
Each physician, doctor, or dentist’s situation is different and their business goals are also likely unique. It’s important to sit down with a company or consultant that can offer personalized guidance on the costs of opening your practice. (Hint Hint – we do that at Ashton Gray).
Here are the three most common scenarios we see at Ashton Gray when it comes to the financial side of developing your medical office real estate:
Scenario 1 – The bank is requiring 20% down to begin your endeavor but you’re not comfortable putting that much cash upfront. Ashton Gray can provide a model that allows you to put $0 down and own up to 50% of your building.
Scenario 2 – The bank is requiring 20% down and you are comfortable with that down payment but not sure where to start with site selection, general contracting, design, etc. Ashton Gray can provide consultation on the next steps of your project including location ensuring that your investment is a wise one.
Scenario 3 – I’m planning a start-up. I don’t want to lease, I’d rather own my building. Ashton Gray can be a partner even here. We take care of all the real estate minutiae so you can focus on what you do best, running your medical office.
Whether you want to put $0 down or 20%, you can rely on our decades of experience to guide you through your building development. Your success is our success, so we approach each project with a focus on your business goals and budget.
But we’re here to talk about what to do after you’ve decided to build your business and own your medical practice office. One of the first steps is choosing a location.
Choosing a Location
Developing your own medical practice opens up a plethora of options for location, especially when you begin with a parcel of land. Deciding where to plant your flag can seem intimidating but there are a few ways to narrow it down.
From a purely financial standpoint, choosing a location that has a high population density or is experiencing rapid growth will often lead to more value down the road. A good indicator of growth is “following rooftops” which refers to areas with homes being built. When you follow the builders, you’re following the expansion of a community. It’s a huge advantage to be the first mover in a flourishing area.
But as a medical practice, it’s also important to think about the community you’re investing in. There are plenty of underserved communities that would benefit from your services and at the same time, you’ll be more likely to stand out in a less crowded market. Moving into an underserved town or area can also help you raise the tax value and property value of the community, i.e. rising waters raises all ships.
Of course, when choosing a location, zoning will determine where and how you can build your medical practice office. Understanding local municipalities’ zoning laws and approval processes will be key to making your project a reality.
Navigating Real Estate Entitlements & Municipalities
Once you have your plan for your medical office real estate it’s time to get it approved. A real estate entitlement is the approval needed to develop land. These are given out by various municipalities and the process length and approval depend on the scope of your project. This process will determine what land can be developed into and like any legal process, it can be tough to navigate.
Some examples of real estate entitlements include:
- Rezoning – If your plan doesn’t follow the current zoning laws, you may ask to have it rezoned
- Landscaping – certain landscaping may be subject to approval by the governing body
- Road – If your land doesn’t have existing roads, you’ll need to get the planned roads approved
There are plenty of other entitlements and what will have to be approved depends on your plan and the governing municipalities. The governing body will take into account zoning laws and city plans when determining entitlement approval making this a legal agreement between you and the government. As such, this is another area where partnering with an experienced consultant can prove to be quite helpful.
Designing Your Medical Practice Office
When you open your own medical practice office, you’re no longer beholden to someone else’s business vision. Now you can take the lessons you learned from working in your respective medical practice and incorporate them into your business goals, whether that be as simple as designing the most efficient lobby or creating the most inviting patient room possible.
Or if you really want to focus on your medical practice first and just need a building to operate out of, Ashton Gray can provide an architect who has designed hundreds of successful medical buildings for Ashton Gray partners, tenants, and owners. The same goes for interior design, you may have a vision for your business or you may just want to continue to provide healthcare services to the best of your ability. Ashton Gray can provide an interior designer to facilitate either way.
Your office has been designed, approved, and financed. The final step is construction. At Ashton Gray, we know this process can be exciting but also pretty stressful. Once a Project Manager has been chosen and plans confirmed, we use a series of meetings to keep the project on track and expectations managed.
- Kick-Off Meeting – Scheduled by the Project Manager and attended by subcontractors, we discuss the expectations and schedule for the project.
- Box Walk Meeting – Once the framing of your building is complete, your Project Manager will walk you through the current construction and discuss plans for mechanical, electrical, and plumbing installation.
- Punch Walk Meeting – Scheduled once the building is almost finished, this is a walk to confirm the list of items that must be completed to declare the project finished.
- Final Walk Meeting – The final walk with your Project Manager, this is where you are handed the keys to your business.
Developing your own medical office real estate can be challenging but it’s just as rewarding. Designing and understanding the ins and outs of your facility will put you in an advantageous position. You can expect fewer surprises, look forward to more control over your business, and expect a larger financial gain as your medical practice will no longer be your only source of income. You now have a substantial real estate asset to leverage and use to expand your medical practice business.
If you’re considering developing your own medical office real estate or are in the process and need guidance, Ashton Gray has helped 100’s of business owners just like you build their dream. We’d love to build yours next.