Medical Spas' Growing Popularity is a Trend Worth Watching.
Doctors and medical experts have always tended to be in real estate as well as medicine. They often own the buildings that house their practices and, once they get a taste of the joys of real estate ownership, start expanding their portfolios with both commercial and residential properties.
Recently, I’ve seen a sharp uptick in the number of medical practitioners changing their business models to open medical spas. Clearly, banks think that doctors are the ideal borrowers. In fact, a lot of physicians wanting to get into this type of business development can get huge loans with little or nothing down to develop new buildings for this purpose or to open their own independent practice.
2018’s Changing Commercial Real Estate Landscape
Just as the residential real estate landscape is changing dramatically right now thanks to housing inventory shortages, issues with affordability, and the rising costs of construction, commercial real estate trends are shifting as well. The retail market, in particular, is evolving. These days, I get more calls for office space and medical space than I ever have before. Often, these calls are from medical professionals who are doing one of two things:
1. Looking to open their own private practice
2. Investigating their options for opening a “med spa”
In a lot of cases, the physicians are successful professionals who have spent a few decades in their chosen field. Often, they are surgeons who are starting to think that they might like to move away from surgical practice. Doctors tend to be very familiar with the concept of commercial real estate because they either have built their own building to house a practice in the past or they know someone who has. They’re very comfortable with the idea of opening a practice like a medical spa that will meet the needs of an affluent population for general medical care and medical-grade aesthetic procedures.
What Lenders Are Looking For
When it comes to lending on these projects, certain medical professionals have a huge “edge” over the competition. Conventional bank lenders love lending money to doctors. They tend to be high earners; they almost always pay their bills on time, and they very seldom go out of business. By the way: That makes them great tenants in your commercial properties as well!
Lenders may offer a physician start-up financing, acquisition financing, commercial real estate financing, and equipment financing to the tune of millions of dollars, often with very little money down.
What Does This Mean for Real Estate Investors?
Well, if you happen to have a medical background, it could mean amazing financing. If you are interested in commercial real estate, it means that targeting properties that afford good opportunities for this type of project could be a good way to get great tenants with lots of financial resources (see sidebar above). That makes your building more valuable in terms of rent collected and the price you could command if you sell.
Pamela J. Goodwin is the founder and CEO of Goodwin Commercial a commercial real estate firm specializing in retail/restaurant development, brokerage and consulting firm in Dallas, Texas, and a Think Realty Resident Expert. Learn more about her commercial real estate courses at ThinkRealty.com/Pamela or reach her at firstname.lastname@example.org.