Make Your Move

Many clients who come to me are looking for a place to build a hospital. They might want to open their first practice, or perhaps their current clinic cannot be expanded. Unless they are experienced in the local real estate market, and very few are, my first piece of advice is that they retain an experienced commercial real estate agent. I emphasize “commercial” because if an agent isn’t familiar with available commercial land, the relevant laws and regulations, and the needs of a business, a practice owner might choose an unusable location.

The agent selected should be results focused. I’ve run across some who want only to make the sale and move on. If they gloss over your list of needs and focus exclusively on location, they are to be avoided. Interview several agents, call references and visit the agent’s office. Commercial agent fees are not small, so you need to be sure the money is well-spent.

The location search cannot begin until you know how much space you need. Programming, or project definition, is a necessary first step. In my 30 years of work, every project has been unique. There’s no one-size-fits-all or a dependable rule of thumb. At my firm, to produce a comprehensive program document we look at the veterinary services provided now and possibly in the future, the caseload, the clinic’s growth history, the demographics, and the budget and schedule.

Most projects fall into one of two types: tenant improvements to an existing building or new construction from the ground up. Let’s cover the basics of both.

Geographic Setting

Everyone has heard that the three most important things in real estate are location, location and location. I’d amend that to a “location that works.” What should you look for?

With an existing practice, consider:

1. Distance from your current practice. The key to a successful relocation is holding on to your clients. Ideally, your new spot will be only blocks away. Some clients will follow you to another state, if necessary, but a surprising number won’t drive much farther than they do now.
2. Visibility. You must be seen. To maintain growth, your practice needs to attract new clients. For both general and after-hours emergency practices, being highly visible to the greatest number of passers-by is critical. This is where a prime spot on a busy road is important. Specialty or referral practices don’t have the same need. Since most of their clients are by appointment from a wider area, being close to a highway exit is a better location for them. I suggest no more than two turns from the exit so that driving directions are easy to follow.
3. Ease of access. All veterinary practices need a location that clients can enter and exit easily. Corner lots are very visible, but traffic congestion can be a problem. In a large urban area, connecting to mass transit is critical. No one wants to haul a cat carrier six blocks from the subway station.

With a new practice, look at:

1. Distance from the competition. Start-up practices need to be aware of where the competition is. You want to look for an underserved area in your target demographic. This is where great commercial real estate agents can earn their money: by mapping other practices and identifying the population growth of neighborhoods. A new general practice wants to be the first and only one in a new planned community. For you, new rooftops means new clients.
2. Visibility. As with any growing business, you need to be found. A location on a busy commuter route is best. An attractive, visible location is a great marketing tool.
3. Ease of access. As with any business site, getting in and out without becoming frustrated is key.

General Factors

1. Cost. You have a business plan, right? Knowing your numbers is critical so you don’t overspend. Knowing how large a mortgage you can afford is the first step in creating a budget that covers site acquisition, build-out, equipment, soft costs and a contingency fund.
2. Zoning. If you take away nothing else from this article, please remember this: Zoning can make or break a location. Zoning refers to a set of laws and ordinances that every town has in place to regulate land use. The same laws that bar a gas station from a residential street will likewise dictate where an animal services facility can go. This, again, is where good agents can earn their keep. You want to be in a zone where your practice profile is allowed and no special approvals are needed. The last thing you want is to have to file a rezoning application or request major variances. These can be lengthy and expensive ordeals. If a special approval is required, I suggest consulting a local zoning attorney before you commit yourself to the site.
3. Restrictive covenants. Some tenant spaces or buildings have deed restrictions. They might limit use or noise-producing businesses. They might address things such as setbacks and buffer zones. A good agent will research and advise you.
4. Public utilities. Of course, your hospital needs electricity, water and other utility connections. Before you commit yourself, find out about water, sewer and power service sizes. Some older locations might be underserved and require expensive upgrades.

Renovation or Tenant Improvement

Consider these important points when you look at a strip shopping center or business park:

1. Visibility. Not all locations are equally seen. In general, avoid inside corners of an L- or U-shaped building. These spots have reduced frontage and might have limited parking.
2. Signage. If you are the first tenant in a new development, you likely can get a prime spot on the property’s main sign along the road. These signs are visible from greater distances.
3. Shape of the space. Just because your program says you need 5,000 square feet does not mean your hospital will fit it into a long, narrow space or an area that is of irregular or convoluted shape. The ideal space is a square or rectangle with an aspect ratio of 1.5-to-1 (depth to width). Even a ratio of up to 2-to-1 is workable, but anything beyond that will result in an inefficient plan.
4. Open plan or load-bearing obstructions. Your clinic should be free from as many internal obstructions as possible. One or two column lines are easy to work with, but a space with immovable interior walls will reduce your options.
5. Single floor or multistory. Repeat after me: Multistory is bad. Even in large referral practices, we want to have most, if not all, clinical spaces on the same level. Administrative and support personnel can work on other floors and not affect health care efficiency, but any multistory plan will dedicate space to stairs or elevators, easily decreasing a plan’s efficiency by up to 15 percent. And remember that most people would rather walk 75 feet than climb 12 steps.
6. Pet access. Any hospital treating dogs needs a place for them to eliminate. Often, this feature is difficult to get in a strip center. Negotiations with your landlord should include access to outside space. Try to get it adjacent to the back door and within a fenced, secure enclosure.
7. Neighbors. Yep, dogs bark. You know it and your clients know it and no one bats an eye. But the insurance agent next door or the cranky guy living in the house behind the strip center will notice. Be prepared to address the issue when negotiating your lease or when Mr. Cranky comes calling.

New Construction

Many of the points above apply to new builds, too, but other issues come into play when you search for a place to construct a hospital from the ground up.

1. Parcel size. Project programming should identify not only your current needs but also a reasonable growth projection. When you build, you likely are locked in to a location for a long period. Your goal should be to accommodate at least five years’ growth and as many as 20 years or more. This includes not just adding to the building’s footprint but also being able to create more parking as the patient caseload increases.
2. Buildable area. Your program says you need 1 acre of land. Does that mean any 1-acre site will do? Not necessarily. What you need is a buildable acre when you subtract things like large setbacks, utility and access easements, watercourse setbacks, wetlands and the like. The seller should provide you and your designer with a survey identifying all encumbrances to land use.
3. Landscape requirements. The zoning code usually addresses required green space. A landscaped buffer space is a good thing because it helps maintain the quality of the community. It is an expense, however, so planting and maintenance should be part of the overall budget.
4. Parking. A zoning ordinance likely addresses the number of required parking spaces. A veterinary clinic commonly needs one parking space for every 200 to 400 square feet of building size, but your practice might need more. A designer can assist you with ideal numbers for both initial and future builds.
5. Grading and drainage. Not all sites are created equal, and some can be costly to develop. In general, a flat site raised a few feet above the road elevation will be less expensive than a sloped site or one below street level. Just because your building site is not in a designated flood plain does not mean you won’t get water inside the hospital during heavy rain. Localized flooding is just as devastating to a business as a hurricane. A sloped site will require a greater amount of earthmoving, which can ruin a budget.