Top Mistakes Healthcare Providers Make During a Lease Negotiation — What Not to Do
Everyone wants to feel like they’re getting a good deal. But most of the time, landlords and listing agents have the upper hand. That’s especially true in lease negotiations.
So many variables affect the success of healthcare real estate negotiations, including timing, market conditions, supply and demand, tenant’s needs, proper representation, and more. And all of those directly affect your bottom line. Having represented thousands of healthcare professionals, we know the mistakes to avoid. From incorrect timing and lack of leverage to placing too much trust in your landlord—here’s what not to do.
Is the agent also representing the landlord or property you’re interested in?
If so, that’s a red flag. When an agent has a listing agreement with the landlord, that’s where their loyalty will lie—increasing the landlord’s profit. They won’t be able to adequately represent both of you in a lease or purchase negotiation, which brings us to the next question you should be asking:
Don’t Take Advice From Your Neighbors
Neighbors talk. And we often find tenants in renewal situations accepting their lease terms because they know several of their neighbors have the same terms. But what they don’t know is—more often than not—the landlord is offering new tenants greater concessions, better lease rates and terms than they offer to those renewing their space. Landlords can get away with convincing business owners that the market is higher and tenants in their spaces are paying fairly. But imagine finding out that you’ve been overpaying by thousands to tens of thousands per year compared to what a new tenant negotiated. Sadly, this scenario happens all too often for tenants who consult one another rather than a professional agent.
Don’t Place Too Much Trust in Your Landlord
Believing a landlord will simply offer their best terms—even if you have a great relationship with them or if they’re a patient—is a common mistake we see. While you might trust your landlord to tell you a reasonable price or a fair deal, it’s rarely the best deal. Landlords are no more likely to voluntarily offer up concessions or reduced lease rates as you would be to voluntarily decrease your treatment fees or voluntarily give someone tens of thousands of dollars simply because they asked you to. At the end of the day, a landlord’s priority is staying as profitable as possible—as is yours—so entering the negotiation process with the right amount of leverage and market knowledge will significantly help you capture the best terms.
Don’t Negotiate Without Market Knowledge
Knowing what viable options exist in your local market is the foundation of an educated real estate negotiation. You’ll want to know about available vacancies, recently completed transactions, future spaces that may become available, how they compare to each other, how they benefit healthcare tenants specifically, what concessions could be offered at each location, and how to execute on all of that knowledge. This is critical information that healthcare real estate agents provide (most of which is not public record or not listed in online databases) with expert knowledge of their local market. Knowing about multiple properties at a time—ones that may be more appealing or offer better value—will not only help you find the best new space, but also help with lease renewal negotiations in your current space (ensuring you’re not over-paying).
Don’t Hire an Attorney to Negotiate Deal Terms
The best teams include agents AND attorneys who complement one another. While you should always have a real-estate focused attorney review your contract to protect your legal interests—lease and purchase contracts are legally binding documents, after all—that same attorney should not be advising you on location, price, or lease terms. What’s more, only bringing an attorney or consultant to the table can often come off as a sign of weakness to the landlord, who knows that the market knowledge isn’t there.
Don’t Sign a Lease Renewal Without Concessions
Lease renewal negotiations should contain concessions similar to what a new tenant would receive. But because most landlords are focused on keeping their business profitable, that rarely happens without firm negotiation and a strategic plan. Same is true with voluntarily reducing your lease rate. But this is where an expert healthcare real estate agent (one trained to only represent tenants and buyers) comes into play. Agents will not only ensure you’re starting the transaction at the appropriate time; they’ll invest time to create leverage with the sole goal of maximizing your profitability during negotiations.
Without representation, it’s hard to know how much money you’ve left on the table. Luckily, landlords and sellers take on the financial responsibility and pay for tenants’ real estate agents. The difference between a properly and poorly negotiated transaction can impact every aspect of your business. So make the most of your next one with representation that will protect your interests.
CARR is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first.
Visit CARR.US to learn more and find an expert agent representing healthcare practices in your area.