An important clause not to be overlooked within a lease contract is the renewal option. Renewal options pertain to the potential extension(s) of the lease upon the date of lease completion. Renewal options will contain language regarding lease rates going forward, concessions such as free rent and tenant improvement allowances and operating expenses. All of these terms are negotiable and will play an important role in the complete structure of a lease renewal. Renewal options are meant to provide flexibility for the tenant in the future. So, being aware of how to strike the right balance, within the lease as well as the renewal, will grant medical professionals the greatest flexibility and financial outcome for their real estate interests.
One of the most common errors healthcare providers make is negotiating lease renewals without the help of a commercial real estate professional, specifically those who specialize in healthcare lease and renewal transactions. Most healthcare groups tend to be self-reliant and entertain lease interactions from within their office. The reasoning is fairly simple, which real estate investors are aware; the majority of medical providers will rely on referrals by way of other medical providers. So, if location (even space) can be identified by referral patterns, then the use of real estate counsel is unnecessary. Or, if location will remain the same, then negotiations of a renewal may be handled in-house.
But, rather, successful medical groups, large and small, understand that in order to achieve growth, they need leverage. Landlords, especially those that are in the real estate business, negotiate with professional guidance from real estate professionals. For healthcare providers, selecting their own representation, one that has performed the same real estate surgery with multiple instruments time and time over, to advocate their position will assist in influencing the outcome favorably. Furthermore, because landlords authorize a split of the commission between the landlord’s broker AND tenant/buyer broker, providers have the opportunity to receive representation from a healthcare real estate professional at no out-of-pocket cost.
MREA is a full service, healthcare real estate firm headquartered in Houston, TX. MREA provides commercial real estate services to healthcare providers and commercial real estate investors throughout the State of Texas.