$6 Could Be Costing Your DSO Hundreds of Thousands of Dollars
Are you a DSO managing your own real estate negotiations?
Does your real estate team have deep expertise in the dental real estate market and the unique nuances of each city and market where your offices are located?
Most importantly, are you confident you're securing the best possible lease terms? Do you have the time it takes to make sure of it?
Commercial real estate is the largest negotiable expense for each of your locations. This makes it critical to evaluate whether a "do-it-yourself" (DIY) approach to lease negotiations is truly the best option. A poorly negotiated lease renewal could cost your organization hundreds of thousands—or even millions—of dollars, particularly when scaled across multiple locations.
Here’s an example to put this into perspective:
Consider a DSO with ten locations, each occupying 3,000 square feet. On their next lease renewal negotiations, they overpay by just $1 per square foot (SF) and receive only $5 per SF in tenant improvement (TI) allowances out of a potential $10 per SF, based on the market and what other tenants are achieving. This seemingly small discrepancy—just $6 per SF—results in a significant financial impact:
$1.00 per SF x 3,000 SF x 10 locations = $30,000 per year x 5-year lease terms = $150,000
$5.00 per SF (TI) x 3,000 SF x 10 locations = $150,000
Combined, this group has missed out on $275,000 over five years. For DSOs with 40 locations, this could translate into a $1,100,000 loss. Can your business afford to lose $250,000—or even $1.1 million—every five years?
While this scenario is hypothetical, we've worked with clients who, without proper representation, would have faced similar costly outcomes. And this example doesn't even account for additional savings opportunities, such as free rent periods, annual rent escalations, or other negotiable terms that could further reduce costs.
The DIY Approach Isn’t Saving You Money
Most healthcare providers attempt to handle real estate negotiations on their own. In fact, 80% of practices take the DIY approach. But when it comes to DIY real estate, the reality is this: you may think you're saving money, but you're likely not.
Without experienced representation, you risk losing significant sums. Hiring a real estate agent specializing in healthcare not only saves you time but also ensures you're creating the best possible financial outcomes for your DSO. Partnering with a healthcare-specific brokerage could save your organization millions and position your business for long-term success.
Don’t let the DIY approach jeopardize your DSO’s growth and profitability. The potential risks are too significant to ignore.
Visit www.releaseadmin.com to learn how Re*Lease Administration’s real estate brokerage services can help your business achieve its full potential.
