Silver Lining: Seeing Your Start-up Dream Come True During Your Downtime

Healthcare providers are on the front lines of defending against the coronavirus disease (COVID-19) pandemic. Yet, since the Executive Order No. GA-09 issued by Governor Greg Abbott on March 22, 2020, many of our Texas healthcare professionals are sidelined due to temporarily closed offices and canceled surgeries and procedures.

As we band together to do our part to flatten the curve, we can shed light on a silver lining for aspiring practice owners. While we wait for April 30th when practices reopen, there are several practice steps you can take during this downtime to make your dream of starting a practice come true.

Opening an office may now take less time.

Our medical real estate experts predict the timeline for opening a healthcare practice will take nine months on average. We believe the timeline may shorten due to a decrease in absorption, which will increase available inventory, but we’re also anticipating potential delays in permitting, construction, and titling due to:

  • Cities possibly closing their permit offices.

  • Construction companies limiting their job-site staff to 10 people for social distancing.

  • Title companies temporarily closing or working from home.

Actionable step #1: Learn the process of starting up an office by discussing your goals and vision with industry-leading vendors who specialize in your practice areawhile social distancing.

This will be a tenant market again.

Prior to COVID-19, landlords were bullish and in a position of power. However, landlords are changing their tune as they anticipate a potential rise in vacancies. To mitigate their possible losses, they may be more willing to make concessions for new tenants.

“We’re seeing landlords, in some cases, offer an additional three months of free rent on top of market if tenants sign leases right now. In other cases, we’re seeing lower rental rates and higher tenant improvement (TI) allowances as they need to stabilize their assets,” said Santee Hathaway, principal of Xite Realty.

Actionable step #2: Target an area you’d like your practice to be in and discuss the current state of the real estate market in that area with our team to uncover hidden opportunities.

Second generation medical-use office space may become available.

We’re anticipating a potential rise in vacancies for retail and office space across Texas, including space used for healthcare practices. If this prediction becomes reality, healthcare providers may secure second generation spaces with:

  • Lower rental rates and/or free rent upfront

  • Lower construction costs (e.g., paint the walls, replace the signage)

  • Existing equipment (if the equipment doesn’t have a lien)

  • Existing plumbing

  • Pent-up demand from patients (unmet routine procedures and elective surgeries)

“When second generation spaces become available, we’re usually one of the first people who get the call. Landlords know we specialize in providing real estate services exclusively to doctors of all types. So, when a doctor’s office opens up, we’re the first to know about it,” said Tommy Newton, principal of Xite Realty

Actionable step #3: Form a team for your start-up so that when these highly sought-after second-generation spaces come online, you’ll be ready to negotiate.

The competition will be focused on restarting.

When existing practices reopen their doors, they’ll be faced with numerous challenges. From a backlog of missed appointments to retraining and obtaining new staff, they’ll have many capital needs to restart their practices before they can spend on marketing or resume expanding their offices.

As a start-up practice, you’ll be able to promote your office without delay. The line itemsespecially marketingfor your start-up budget will remain the same, whereas your competition will likely not focus on marketing initially.

Actionable step #4: Define your start-up practice budget and brand. Communicate these with your team of vendors.

Aspiring practice owners can rest assured that during this uncertain time, Xite Realty is working diligently to secure optimal office space as well as negotiate the most aggressive terms for our clients. We’d appreciate the opportunity to listen to your start-up practice dreams and discuss all possible options with you.

Note: This information is subject to change as developments occur surrounding COVID-19. Check back for more and/or updated information on Xite Realty’s resources page.