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Posted: Monday, February 18, 2008

High Demand, Low Supply!

Doctors Seek to Buy Buildings for Investment, Control

A would-be trend in the San Fernando Valley commercial real estate market is little more than wishful thinking as a growing number of healthcare practitioners search for opportunities to be their own landlords.

The problem for a doctor who wants to buy a building in which to operate a medical or dental or practice is an acute shortage of suitable space in the San Fernando Valley.

For the moment, physicians, dentists and clinicians must settle for occasional opportunities to buy into office-condo complexes.

“I get calls from people all the time who say ‘I’m dentist, or I’m a doctor and I’d like to buy a building,’” said Cathy Scullin, a broker at NAI Capital in Encino. “I say get in line, there are about a hundred people in front of you.”

There is virtually no inventory of properties—vacant or already developed—large enough or sufficiently adaptable to meet the stringent legal requirements for use as healthcare-related buildings.

Lower costs versus leasing, plus the ready availability of attractive Small Business Administration (SBA) financing, and long-term investment potential have made being one’s own landlord while practicing medicine or dentistry just what the doctor ordered.

“With 15 percent down, they can get a fixed-rate loan amortized for 20 years,” said Lee & Associates commercial real estate broker, Marc Riches.

But, Riches said,there is a catch.

“They should ask themselves if they believe they will be staying in one place for the long haul,” he said. “Do you believe you will be occupying this space for five to 10 years? That’s the perfect candidate.”

That does not mean medical professionals should not buy a building or an office condo as a long-term investment.

“Realistically, real estate is always a good investment,” Sam Monempour said. “And it’s absolutely a longer-term model with doctors.”

More complicated plumbing, plus high prices for high-tech medical and dental equipment, as well as the need for more disabled-access combine to push the costs of setting up an M.D. or DDS office five to 10 (or even more) times higher than most other types of office space.

“I think it’s basically a better investment than leasing, where you’re pretty much throwing your money away,” explained Igal Leizerovich, DDS. “Also, I don’t want to deal with landlords, neighbors and parking issues.”

Dr. Leizerovich is moving from a 1,000-square-foot practice in Sherman Oaks to a 1,700-square-foot building at Bollinger Business Park in Newbury Park.

That is the kind of control doctors are getting, said Riches, the broker for Bollinger, for being willing to pay the $450 to $500 per square foot to buy in the development.

“You don’t have patients smelling the next-door tenant’s daily microwaved curry at lunch time; you don’t have to put up with the whims of a landlord—either in regard to the premises or yearly rent increases.”

Doctors who own also get to be more creative with the design of their build-outs.

“And, of course they will be willing to put more money into better equipment, because they know they won’t have to move unexpectedly; it’s their building,” said Riches.

“I am really looking forward to the move,” said Leizerovich.

Article By: San Fernando Valley Business Journal, Thom Senzee


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