Own or Lease? Deciding Whether to Build Your Practice's Own Building

Most practices start in leased space, and many stay there for good reasons. At some point, often when a lease is up for renewal or the practice has outgrown its suite, owners ask whether it is time to build a building of their own. There is no single right answer. Both paths work, and both have costs that are easy to underestimate. This guide lays out the trade-offs as plainly as we can, from the point of view of a contractor that builds new buildings and finishes out leased space.

What leasing gets you

Leasing asks for less money up front. The landlord owns the land and the shell, and in many leases pays part of the interior through a tenant improvement allowance. Your capital goes into the practice instead of the real estate.

Leasing is usually faster. A finish-out in an existing building skips land purchase, zoning, platting, civil design, and the shell, so the path to opening is mostly design, permit, and interior construction. In second-generation space (a suite built out for a previous medical tenant), some walls and plumbing may be reusable.

A lease also leaves more room to change course. If the practice merges, sells, moves, or shrinks, you face the end of a lease term rather than the sale of a building. The landlord carries the roof, the parking lot, and the structure, depending on how the lease divides those costs.

The trade-offs are real too. Rent can rise at renewal, and you may have no good place to go if it does. The landlord approves your drawings, your signs, and sometimes your contractor. The building may not suit your equipment: roof units, electrical service, slab, and ceiling height are what they are. And at the end of the term, the lease may require you to remove what you built. Our guide on what to ask before signing a medical lease covers those terms.

What owning gets you

Owning gives you control. The building is drawn around your floor plan, so plumbing under the slab lands at each sink, the electrical service is sized for your equipment, and the roof units serve the rooms you actually have. No one else approves your layout or your hours.

Owning also means no landlord decides at renewal whether you stay, and you can plan for growth on your own terms. Many owners hold the building in a separate company that leases it to the practice. Whether that suits you is a question for your accountant and attorney, not your contractor.

Holt Veterinary Clinic in Dallas is a good example of what owning a site makes possible. We built a new building for the clinic on its own property, behind the original 1946 building on the former kennel site, while the clinic kept operating. Once the new building was open, the original structure was abated and demolished to make room for a new approach and parking lot. You can read about it on the Holt Veterinary Clinic project page.

Owning has its own costs. It takes more capital and usually more debt. You become responsible for the roof, the mechanical equipment, the parking lot, and the insurance. The building is harder to leave than a lease if the practice changes. And building new takes more of your own time, because you make decisions about land, design, and approvals that a tenant never sees.

Timeline and your attention

A ground-up building has more steps before construction starts. You find and buy land, test it for zoning, utilities, drainage, and soil, and take it through the city's site plan, plat, and civil reviews before a building permit is issued. Our guides on buying land for a medical office building and site approvals in DFW cities walk through those steps.

A finish-out starts closer to the finish line, but it still has design, permit, accessibility review, and construction ahead of it. If your current lease ends on a fixed date, the honest question is which path can be ready in time. Count backward from the date you need to move, and be realistic about how many decisions you can make while also running a practice.

Questions to answer before you decide

• How long do you expect to practice in this part of town? Owning makes the most sense when the answer is a long time.
• Are there partners, associates, or a buyer in your future? A building can help or complicate a sale or a buy-in.
• Does your practice need things leased space handles poorly, such as floor drains, imaging shielding, heavy equipment, or a separate entrance?
• Can you find land that fits, in the area your patients come from, with zoning that allows your use?
• What will your lender finance, and how much cash will the practice need to keep on hand while the building goes up?
• Do you want to be a landlord? Extra space you lease to others can help carry the building, but it comes with tenants.

Middle paths

The choice is not always all or nothing. A build-to-suit lease has a developer build a building around your plan and lease it to you. You get a building drawn for your practice without buying the land, though you remain a tenant. A medical office condominium lets you own your suite in a shared building. A building of your own with lease space for other tenants lets you size the building for growth and lease the extra until you need it. At the Celina Medical Office Building Shell, a single-story medical office building we built from the ground up, each storefront has its own canopy and tenant sign light, so each suite can be leased on its own.

Our guide on shell and finish-out in one contract covers single-tenant and multi-tenant buildings in more detail.

Pricing both paths before you choose

The most useful thing you can do early is put the two paths side by side with real numbers for your practice. We prepare a first budget at no charge and can do one for a finish-out of a space you are considering and one for a new building on a site you are looking at. A detailed estimate is priced later from drawings. Bring your lease terms, your site information, and your equipment list, and ask your accountant to look at the results with you.

Learn more about how we build new buildings from the ground up. Structures and Interiors also finishes out and renovates leased and existing space, so we have no stake in which path you choose.

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