How to Spot a Good Medical Office Space Investment

  • September 6, 2018
  • CRE
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Investing in commercial real estate is a great way to ensure returns.  The varying sectors of the commercial market are constantly shifting and evolving, however, the medical office space sector has stayed at the forefront of positive investments for some time now.  If you’re looking to dive into commercial investments, it’s certainly an avenue you won’t want to discount.

What Makes Medical Office Space a Great Investment?

The medical office space sector of the commercial real estate market has seen a steady uphill climb since the recession.  In fact, it has the lowest vacancy rates of any other sector.  There are quite a few reasons for this.  For one thing, health and wellbeing are top priorities for everybody and unfortunately, there’s no way around getting sick.  With our ever-growing population, this means that more and more people are seeking medical care.  Add to this the decline in new medical office space construction and you have a perfect example of supply not meeting up with demand.  This disconnect makes these types of buildings essentially unaffected by the state of the economy.  It also leads to strong tenant retention rates, as medical offices settle in and resist the temptation to move, understanding that there is not an oversupply of properties available on the current market.

It is important to understand, however, that not all medical properties are created equally.  Some will make a far better investment than others.  Let’s take a look at some of the factors you will want to consider when searching for your medical office investment property.

Location

medical office spaceThe location of your medical office space is going to determine how much or how little it appeals to the right tenants.  Finding a building that is in close proximity to a hospital or major medical center is going to lead to a far greater appreciation of the property over a shorter period of time.  The reason for this is that these larger medical facilities are much more likely to send their patients to off-site practitioners and specialists that are nearer to them and more convenient for their patients.  It also gives these practitioners greater exposure to the patients that they are seeking.

Regulatory Requirements

Unlike many other types of commercial real estate, medical office space has its very own set of rules and regulations that need to be followed.  While most buildings that are zoned for medical office use will likely already meet the standards put forth in your particular state, some buildings which are newly converted to medical office space may require a lot of renovations and changes to ensure that they do.  Whether it’s ADA compliance, or meeting HIPAA standards within the waiting area or proper biohazard disposal protocol, you will want to make sure that your space is ready for its next tenant.  Depending on the nature of the office, there may also be additional requirements to protect patients from the radiation risks associated with x-ray machines, CT scanners, et cetera.

Parking

Parking for medical office space is another big selling point to a tenant.  Not only will they need to provide spaces for employees, but additional spaces will be required for patients coming in and out of the practice.  There will also likely be a greater need for extra handicapped spaces, as well as a drop-off area close to the entrance of the building.

Options to Diversify

The model of medical office space has shifted exponentially over the past decade.  More and more practices are opting for a one stop shop where they can provide their patients with a broader spectrum of services under the same roof.  This means that practices are growing in size as a more diverse mix of tenants’ moves into a shared building.  Your space should be able to accommodate the different needs of each practitioner.

Layout & Upgrades

As the medical model has shifted, so have the floor plans and layouts of medical office space.  Tenants are looking for open floor plans, larger waiting areas, and more aesthetically pleasing environments.  As a landlord, you will likely be including in the terms of your lease a tenant improvement allowance which will cover many of the changes and upgrades your tenant is looking to make.  That being said, the less that needs to be done, the easier it will be to secure a quality tenant who is looking to get their practice up and running quickly.

Looking for a Medical Office Investment Property in Baton Rouge or the Surrounding Areas?

Now that you know why medical office space is a great investment and what to look for to ensure that you get the best bang for your buck, it’s time to find the right agent to help secure your transaction.  At SVN | Graham, Langlois, & Legendre, LLC, we offer our clients reliable, trustworthy assistance in finding them the perfect investment properties.  Take a look at some of the medical office space listings on the current local market and contact us today to schedule a walk-through.

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