Many physician practices face a “deadly duo”: rising administrative costs and declining reimbursements, forcing physicians to seek creative approaches to improve their financial outlook. Physicians are familiar with the adage “Physician, heal thyself” in the medical sense, but now it applies to taking care of their own bottom line. In today’s practice environment, they must be savvy business professionals as well as healers.

Increasingly, physicians seek a return on investment in all areas of their business, including their office facility. Because real estate long has been touted as an inflation hedge, office condos are becoming popular with investment-minded medical professionals. They meet the needs of physicians who are searching for ways to increase their profit margin and secure a long-term investment for retirement or a value-added asset if they decide to sell their practice.

This is evident in the North Texas areas of Frisco, Plano, and McKinney, where medical practices account for 65 percent of office condo sales. While office space typically ranges from 1000 to 10,000 square feet, the average office condo Shea Commercial sold in Q1 2005 was 3000 square feet.

The steady demand for an above-average amount of office space is because medical practices and other businesses are planning for the future. Periodontist Eduardo Tanur, DDS, MS, at the Royal Creek office suites, said, “I went for 2800 square feet, even though our current needs call for 2100 to 2200 square feet. I wanted to think long term and have room for expansion so I could remain in this prime location for the rest of my professional life.

“Purchasing a medical office condo provides both short-term and long-term economic gains,” he added. “It made more sense to pay a mortgage instead of paying a lease. My money is going toward an asset that I own.”

By owning their medical office space, healthcare professionals are investing in their future. They can leverage the tax advantages of owning property plus gain substantial property appreciation. If they relocate, they can sell the office condo or generate revenue by maintaining ownership of the office space and leasing it. Overall, medical properties are a more stable investment than retail space and tend to have a higher and more stable occupancy, extensive improvements, and profitable tenants.

But medical professionals who rent space face increases in monthly lease payments. Moreover, landlords often require a commitment of three to 10 years. When a lease expires, the physician could face many variables and be forced to move.

Office condo ownership allows physicians to customize their space to meet their needs. The condo’s interior layout must meet the American Disabilities Act requirements, facilitate compliance with new privacy legislation for personal health information, and allow for installation of the latest technology and medical equipment. The office space also must be able to accommodate business growth.

Proximity to major healthcare facilities promotes business growth by leveraging existing patient flow, making a medical office investment even more attractive. Many physicians open satellite offices in growth areas or in locations with easy access to freeways to take advantage of high visibility, beneficial traffic patterns, and efficient parking designs where 80 percent of the spaces are within 200 feet of the entrance.

Office condos are in their infancy stage in Dallas and Fort Worth. Prices average $165 per square foot, but are expected to increase to more than $200 per square foot over the next two years. In New York, Washington, and Northern California, office condos command more than $400 per square foot, while office condos in the Phoenix area range from $200 to $275 a square foot. The potential for appreciation, along with multiple advantages of ownership, make office condos a smart investment for solo or small practices as well as large group practices.

Peter Meyer, principal at Shea Commercial, the nation’s largest developer of office condos and a leading office, retail, land, and residential transactional broker. With about 3 million square feet developed in four states, Shea Commercial has headquarters in Scottsdale, and offices in Dallas and Las Vegas. For more information, call 214-340-4747.