Leasing space for a dental practice

An important component in the success of a dental practice is the lease agreement for the office space. Occupancy costs can be one of the largest expenses in a dental practice. More importantly, selection of a good location is critical to patient flow and income. Therefore, dentists should consider the lease of an office location not just as a necessary expense, but as an investment. If the location is poorly chosen or if the terms of the lease are overly slanted in the landlord’s favor, it can affect your finances as well as reduce the ability to transfer or sell the practice. A new dental practice buyer is unlikely to assume a highly unfavorable lease and purchase a challenging or unsuitable location.

Running and growing a dental practice is hard enough, and an above-market lease payment can be a drag on growth. New dentists sometimes fall into the trap of associating high-end, high-cost office space with high earning potential. These are not necessarily associated with one another. Be sure to conduct a feasibility study and formulate a detailed business plan before making the site selection.

Also, with the amount of extensive build out and lease-hold improvements done in a dental office, a dental practice cannot be easily moved. Once the build out has started, consider yourself committed to the location. It is important to remember that the property owner’s broker or attorney likely drafted the lease agreement. You should always seek the advice of your own broker or counsel before engaging in such an agreement. Failing to do your due diligence can be a costly mistake!

Charles Kim is a dental practice broker at Transition Consultants, a practice merger and acquisition firm. Mr. Kim provides transaction advisory and dental practice valuation services to dentists and dental groups nationwide. He can be contacted at 800-416-2055 (x224).