By Peter Heidenberger
October 29, 2019
Choosing a location is one of the most important decisions any business can make, and dental practices have unique challenges when it comes to commercial real estate. Therefore, it’s helpful to examine the industry as a whole to effectively narrow down options and customize their experience. While rental rates and target demographics are major factors, we have to take the analysis a few steps further. The competitive landscape, visibility, traffic patterns, space type and buying options all play significant roles in selecting the right location for a dental practice.
When deciding where to set up shop, dentists first need to identify where the ideal patient is located. However, those location options must be aligned with opportunity. Being surrounded by patients won’t be successful if the area is overwhelmed with other providers. Any location decision must consider the competition. Many dentists tend to overpopulate high-income areas, leading to missed opportunities in lower-income areas. It’s also smart to consider a location in a newer community, as the dentists in established communities have a high probability of patient loyalty.
The American Dental Association advises that a healthy competition ratio is one dentist to every 1,500 patients. Additionally, research conducted by the American Dental Association and the Health Policy Institute indicates that the number of dentists in the United States is expected to increase through 2037, making it imperative for dental practices to stand out. This presents an opportunity for providers offering services not readily available to an area. Entering a competitive area isn’t impossible, but practitioners may only survive by the skin of their teeth for the first few years. They won’t be able to rely solely on word of mouth or visibility for new business, and instead they may need to get creative with marketing strategies.
Another component of securing a competitive edge is to prioritize traffic conditions, visibility and parking. A good parking option is seen as one of the most substantial perks for patients, allowing them to get in and out as smoothly as possible. This is particularly true for those patients, especially children, undergoing emergency dental procedures or general anesthesia. Ideally, the space should have designated parking. If not, valet is the next best option. Interpreting traffic patterns alongside signage opportunities will help determine if patients would see the practice or signage for the practice during their daily routine.
Visibility can also influence whether retail space or office space is the better fit. For instance, a retail location could have 40,000 cars pass by each day, placing more eyes on the practice. In addition to the road traffic, retail space benefits from nearby popular destinations, such as a school, grocery store or coffee shop that draws in foot traffic. Neighboring businesses are especially important for pediatric dentistry providers, which can cater to the busy lives of parents. Think of a high-visibility retail space as a marketing expense because, although a traditional office space will have a lesser base cost than a retail space, it may require practitioners to spend more on big marketing campaigns and enticing promotions to get in front of new patients.
A dental practice’s office is a hefty investment, with the cost of the space coupled with expensive equipment and installation. Relocating that machinery can be costly, which is one reason why a typical dental office lease is 10 to 15 years. Therefore, some practice owners may want to consider buying their real estate rather than renting. However, there are still plenty of upfront costs when purchasing real estate. Dental buildouts often have a price tag well over $150 per square foot, not including equipment. Real estate owners should be prepared to pay out of pocket or finance a buildout that would cost $450,000 to $750,000 for a traditional 3,000- to 5,000-square-foot space. While owning has tax advantages, it also comes with many of the expenses that a landlord would absorb if the practice were renting. Regardless, many of the best-located spaces won’t have purchase opportunities.
Dental practitioners know that when opening a new office, choosing a location is the most important decision they’ll make. However, the process involves much more research and expertise than most dentists initially realize, making a strong real estate team a vital resource. Real estate advisers are equipped to align physical space with business goals, allowing dentists to focus on maximizing smiles per square foot.
Peter Heidenberger is a Vice President with Transwestern’s Occupier Solutions group, where he specializes in representing dental practices.
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