I still had the option of going with the 1,870 sf office for $2.35/sf triple net. Although the space works out great, I still thought it was too expensive. So, I chose to go through another round of touring properties. Over the course of a month, only a few new properties showed up in the market. Thus, I had to expand my search criteria to Sunnyvale, which is 8 to 10 miles away from O’Connor Hospital, but only 2 to 3 miles away from Koreatown. In the end, I narrowed it down to three properties again.
Newly listed, this one was in Sunnyvale near a residential area. It was located in a large multiple single story building plaza about 2 miles from El Camino Hospital, which had two Korean primary care physicians on staff. The plaza had twelve dentists back to back! There were also three family medicine physicians, an OB/GYN group, and a few other offbeat medical specialists. The space was 1,750 sf at $3.15/sf triple net. A little on the expensive side again, but my agent told me that the landlords were very negotiable, and we probably would be able to drive the price down significantly. It was previously a dentist’s office. I liked the floorplan a lot. I was amazed how efficiently it was designed. There were 6 exam rooms, an office, a nice waiting area, break room, and a bathroom. Each room was already equipped with sinks. The bathroom did not meet ADA standards however. Still, I probably wasn’t going to need too much tenant improvements, for which the landlord would most likely eat the entire cost. However, the remote location was my main concern. It was definitely one to keep on my radar though.
This office was located on a major road with a lot of visibility. It was 2 miles away from Koreatown, and a lot of people would definitely pass by this office on their way to Koreatown. It was a large three story financial office building. Located right in front of the entrance on the first floor, this office was 2,245 sf, which was more than I needed. The asking was $3.00/sf full service. The building had a huge parking lot. The previous tenant was a financial consulting company, meaning that tenant improvements were going to be significant. The walls would have needed to be completely torn down, and new walls and plumbing would have needed to be installed. The other problem was that there were a lot of windows in this office, which would limit the flexibility of space planning for dark exam rooms. The office didn’t have a bathroom. Instead, patients would have to use the one in the common area. The landlord was not willing to pay for the cost of hiring an architect to create a potential floorplan that would help the contractors estimate the tenant improvement costs. That meant that I would have to pay $1,000 or more to have architect design a floorplan that I might not even use. One last thing was that there was a retina specialist in this building, which would probably limit my own medical retina patient load.
I eventually signed a lease with this property. This space was located a mile from O’Connor hospital. It was on a major street that intersected one of the largest streets in San Jose. There were two major highway exits nearby, and also two large shopping malls. There was a bus station right in front of the building. This location was very close to the place I had put in an offer previously. It was a large three story office building that recently changed ownership, and underwent a huge remodeling project. This building started out with 40-50% occupancy, and eventually grew to 80% occupancy. his means that all remaining spaces have been on the market for over 1 year, and I would probably have more negotiating power. The space I looked at was a 3,000 sf space on the third floor. The landlord was OK with me taking only a portion of it. This property asked for $3.00/sf full service. The space itself was a completely empty shell, but had HVAC, electricity, and one plumbing source in place. The bathroom would be in the common area, and not in the office. Tenant improvements were, once again, going to be significant. However, the landlord offered to contribute $40/sf! The landlord also agreed to pay the architect fees for creating a floorplan. lso, the actual address was in Santa Clara, the same city as Koreatown, which I thought would attract more Korean patients. Overall, this was a fantastic opportunity.
The main knock on this place, however, was that there was already a two ophthalmologist practice just two doors down. One guy was in his late 60s and the other guy was in his mid 40s. Both were general ophthalmologists, who pretty much did the same things I do. There were no other physicians in this building. In the beginning, I thought that this would be a deal breaker, but the more I thought about it, the more I realized that it shouldn’t be such a problem. Remember, the first property in Sunnyvale I viewed had twelve dentists in a row! If these dentists can open an office one on top of the other and still survive, I could probably do the same. In all honesty, physician practices aren’t like a McDonald’s and Burger King next to each other. For these businesses, a patron can change his or her mind at any point in time, and choose to walk out of one restaurant to go to the other. For medical practices, by the time a patient steps into the building, he or she already has an appointment, and is pretty much committed to seeing that particular doctor. They don’t really have the option to just walk in to a neighboring doctor’s office for an examination on a whim. Also, most patients will choose to stay loyal to one physician, instead of going back and forth between different doctors depending on how they feel that day. In additon, our target populations would be somewhat different as well.
To give myself a little more peace of mind, I looked up the various practice addresses of my mentors in residency, and looked to see how many other ophthalmologists shared the same office building. There were quite a few who practiced in the same building as other ophthalmologists. One attending actually practiced next to five or six other ophthalmologists! That definitely gave me much more reassurance. In the end, I thought the positives of this office space clearly outweighed the fact that there was another ophthalmology practice next door.
Also, I really really liked the landlords a lot. Both of them were down to earth, no B.S. straight to the point people. Having interacted with a completely unreasonable potential landlord with my previous offer, I began to put more weight in the character of the landlord.
Given that the two other properties in Sunnyvale were going to be more expensive, and also because there were so many positives to this property in Santa Clara, I decided to put in an offer on the Santa Clara office, and was motivated to make it work!