Once you’ve narrowed down the location for your next Healthcare office, determined how much space you need, and worked with a real estate professional to find a few spaces, you have an exciting decision to make!
Consider the following key criteria to guide your decision: Can you afford the cost(s) required to make it into the space that will best serve and portray your vision?
Understanding the following conditions of the space will help you get started in determining the cost required.
Condition of Space
The conditions of space you are looking at will determine a lot about your potential costs, as well as the timing you need to prepare the space to be occupied. There are typically three types of space: Gray Box, White Box and Existing/As-Is.
Gray Box
First, we will talk about “Gray Box”, also known as “Raw” or “Black Box’. This is space that has never been built out and has no or minimum infrastructure (i.e.: none of the following: mechanical HVAC {Heating, Ventilation, Air Conditioning} system, plumbing, and electrical service).
This space requires the most amount of work and time to be ready for move-in, BUT it also receives the largest tenant improvement (TI) allowance and is a “clean slate” to design the best layout with minimal compromises. We typically see this type of space in a professional office building.
White Box
Next, we will discuss “White Box” or “Vanilla Box”. This space may have never been occupied, or has been occupied but had a wide open plan, like a retail shop, or has been recently gutted to “start-over”. The biggest difference between a Gray Box and a White Box is that the white box has the infrastructure in place.
Since infrastructure is a large part of the cost of the build-out, the TI allowance is typically less for these buildings. The space usually requires less time to design and build out, though you do have to work around the existing restroom locations, unless you want to pay to move them, which is not recommended.
Existing/As-Is
The last space, which is the most common, is an “Existing” or “As-Is ” space. This is a space that has definitely been occupied.
Very often we see this space has little or no TI allowance (i.e.: they will replace a low cost item, such as the carpet). Our suggestions for this type of space is (from a space plan versus cost perspective) if you can reuse 90% or more of the existing structural space (minor construction) and all you want to do is finish changes, then this is typically a great deal.
Remodeling an Existing/As-Is space can cost more than building-out a White Box , because you have to rework structure for it to work for your function and flow. If you need some major changes to make it work, you have to weigh the pros and cons. Though every situation is different, I will say that if the space is in the right location and you can cover the costs of a remodel, then it will be worth it. And, in some cases, we have seen the landlord give a generous TI allowance for spaces that need a significant amount of work.
What is included – and what does it need?
Now that we have determined the general type of space, next you need to be very clear with the seller or landlord on what is “included” and what is not included. What we have described is a broad and “typical” explanation, but it is not the building industry “standard”. There are so many variations.
If you are considering a Gray Box/Raw space now, what will be done before you lease or buy it? For example, will the electrical panel be provided? Is there a floor – or is there only dirt that needs a floor poured? If it’s a White Box, is the plumbing only stubbed up and you need to provide the toilet? Is there a ceiling and lights (do you want to keep them or replace)?
If it is Existing/As-Is space and you need an X-Ray room, you need to think about what is the existing electrical panel capacity. Is the restroom current ADA code? And when was the space last remodeled and permitted as you may be required to bring the restrooms up to code. These are big ticket items that have nothing to do with the form or function.
For a lease, how much is the Tenant Improvement Allowance?
Now that we have given you an overview of space conditions, you can better compare the Tenant Improvement (TI) amount the landlord offers for each space further. This construction allowance can vary between $0 and $150 per square foot. If you know what you want and how much it should cost (before you sign the lease) you have a better position in your negotiations and determining if there is anything extra you want provided by the landlord prior to using the TI allowance. This amount can make a difference in the final cost of your building the space, and can be a good negotiation point when talking with the landlords.
Check out our Tips For Leasing Holistic Healthcare Office Space, for further details that you need to find out from your realtor or the landlord for leasing a space.
Weighing all the costs together
As you know, your office space will have a large impact on your practice success. Finding a space in an ideal location, that is the right amount of space you need play major factors, but you also need to consider how much the space will cost to fit your vision.
At CrossFields we make it simple for our Wellness, Healthcare & Chiropractic clients by guiding them through all of the details of weigh all of these costs, and beyond. We would love to connect with you and share the CrossFields difference in one of our no obligation Complimentary Consultations.
