Clinic and Office Construction Buildout

Costs and Considerations for Building Out a New Medical Office or Clinic

The cost of opening a new clinic or office space is more than just your lease costs. You also need to factor in any build-out costs. Whether it is a brand-new building or a second-generation space, there is likely going to be construction required to turn the space into the final product you desire. To find the perfect property at the right price, you need to understand all the costs involved in the build-out as well as the overall lease costs.

The construction costs can vary significantly based upon the following factors:

Tenant needs

The needs of office space, general healthcare practice, and specialty care space all have different requirements. High-end finishes and specialized spaces will drive up build-out costs significantly.

Condition of the property

New ground-up construction will require more build-out work than an existing property that has been built out for a previous tenant. However, 2nd generation space may need additional upgrades before it is ready for your occupancy.

Cost of materials and labor

These costs can vary significantly depending on the demand in the marketplace. Right now, we are seeing pricing at an all-time high for lumber and steel.

The needs of each tenant are unique. Once a tenant determines exactly what they need, it will be priced out by selected contractors and final build-out costs can be quoted. Typically, the landlord and tenant will split construction costs; this will be a significant part of lease negotiations. These costs can be handled in a variety of ways. The two most common ways are a turnkey build-out, where the landlord provides the space in a move-in-ready condition, or a tenant improvement (TI) build-out, where the tenant handles the details of construction but is given an allowance to help pay for it.

No matter who manages the build-out of the space and who pays for it, it is important to negotiate all the specifications within the lease document. There are multiple different lease structure strategies that can help tenants with the burden of construction costs and when those costs are incurred. It is critical to know when the landlord’s cost end and the tenant’s costs begin. Being clear about build-out requirements means everyone gets what they want without any surprise expenses.

If you would like to talk about your leasing and buildout costs for a new healthcare or office space, reach out to a Rokos broker.

We can help guide you to make the best decisions that fit your business needs.

Rokos Advisors is an award-winning Minneapolis – St. Paul based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.

*Article authored by Jake Sampson - Senior Associate