In this episode of Beyond Bitewings, Ash sits down with Mark Brodson, Managing Broker at Resource Commercial Advisors, to discuss current design and real estate trends for dental practices. Mark shares insights on how dental office design now focuses more on patient comfort and the overall experience, moving away from the traditional, clinical atmosphere to environments that feel more like spas or lounges. He gives a detailed look at space planning, explaining typical square footage requirements for modern practices and the growing interest among dentists in expanding services to include aesthetic treatments like Botox.

The conversation also explores key considerations for dentists deciding between leasing or buying their office space. Mark Brodson explains the importance of lease clauses, including rights of first refusal and demolition or relocation clauses, and the value of working with a professional broker throughout the process. The episode wraps up with a discussion on suburban versus urban demand for dental spaces post-COVID and the significant impact that updated office design can have on the value and marketability of a dental practice.

To find out more and connect with Mark, visit: https://www.resourcecommercial.net/mark-brodson/

Key Topics Discussed:

• Design trends in dental office spaces

• Patient experience and comfort in dental practices

• Typical dental office sizes and efficient use of space

• Leasing vs. buying dental practice real estate

• Important lease clauses to consider (right of first refusal, demolition/relocation)

• Tenant improvement allowances and lease renewal strategies

• Factors that influence the value of a dental practice

• The shift from urban to suburban dental practice locations

• The role of professional brokers in real estate decisions

Welcome to Beyond Bitewings, the business side of dentistry, brought to you by Edwards and Associates PC. Join us as we discuss how to build your dental practice, optimize your income, and plan for your future. This podcast is distributed with the understanding that Edwards and Associates PC is not rendering legal, accounting or professional advice. Listeners should consult with their business advisors before acting on any of the information that is shared at Edwards and Associates PC. Our business business is the business of dentistry. For help or more information, visit our website@eandassociates.com.

Hello and welcome to another episode of Beyond Byways. My name is Ash, and in today's episode we are interviewing a very special guest. His name is Mark Broxton, who's with Resource Commercial Advisors. And we're thinking of doing this episode where we talk about the trends of dental practices or, you know, potential owners when they're thinking of acquiring a lease space or a place where they want to have their practice. What are some of the things, components, design trends that they're looking for before establishing it? So, without further ado, Mark, how are we doing today?

We are doing great, Ash. Thank you very much for having me on the podcast. It's an honor to be here.

Oh, it's all our pleasure. I'll tell you this much. So you know, for our listeners who may not know you, can you briefly describe what maybe Resource Commercial does and how much of your work involves dental or healthcare clients?

Absolutely. So, as Ash mentioned, my name is Mark Brodson. I am the designated managing broker of Resource Commercial Advisors. We are a medically focused commercial real estate firm based in Northbrook, Illinois, just a few minutes north of Chicago. Chicago along the lake. And we end up doing, I would say, probably 65 or 70% of our business in the medical arena. The majority of that is in the dental space. We're passionate about dentists and we recognize that they have special needs that were uniquely set up to assist quick explanation.

When you find a location and sign a lease, we consider that to be the beginning of the process, not the end of the process. The next part of the process really is where the magic happens. And that's all very much in line with your theme for today. How do you build out, design, and successfully open a beautiful dental practice? And so we have One thing that separates us from other brokers is we have an entire project management team that is expert in helping dentists with everything from what we call site selection to turnkey. So once that lease is signed, we'll help identify architects, designers, we'll bring along project managers from our team. And we'll really manage those projects on a weekly basis to make sure that they stay on time and on budget. And for those of your listeners who are wondering what are Breath of reaches, we are national currently doing work or have recently completed work in about 25 different states. So wherever you are, we are here and available to help.

Oh, that's fantastic. So Mark, you know, tell me this from a very high level, right? What are you seeing with dentists today compared to, let's say, five or 10 years ago? What are they looking for? What's different?

So today, you know, there's very much a movement to design offices around patient needs. And what I mean about patient needs are not just, oh, I need a root canal today. But if you think about it, the dental environment traditionally has been a sterile, very medical, very clinical feeling office where you go and, and you know that you're having a procedure and everything down to the look and the feel and the lighting and the smell was all very clinical. What we're seeing today, and we just finished a 4400 square foot office for a concierge dentist in Skokie, Illinois. The whole theme of that office was around putting patients at ease. So from the moment they walk in, it was designed professionally to be a stress relieving experience, a spa like experience. And so you walk through the big glass doors and there's a curved kind of sidewalk, if you will, that leads into the treatment area. And lots of soft touches with soft lighting and wood effects and soft furniture.

And so you walk in and it feels much unlike any other dental experience. You're walking into a lounge, a comfortable area. It's designed to get the patient's mind off of the treatment ahead and on to just feeling very comfortable with the immediate surroundings.

I see. Which makes sense. And I think I do know what you mean. My current dentist, whenever I walk into his office, it smells like gingerbread. It sounds, I mean, it smells fantastic. And every time I have to go visit, I'm always dreading it. I'm not sure if I want to go today or, you know, that clinical smell, I don't know, it's like fear inducing.

It really is. You know, it's almost like Pavlov, right? When you smell that, and I don't know what that scent is, but it's in every dental office. It's a very septic or antiseptic. Very official smell.

Very official, yeah.

But you know, when you smell that smell that you're in for, you know, a procedure, some treatment, some time in the chair. And what we're really trying to do with modern dental spaces these days is try to evoke something that is much more putting the patient at ease from the minute you walk in to the minute you walk out.

That's right, yeah. The entire experience. So the 4400 sq ft practice that you mentioned in Skokie, how many operatories did it have?

So I think there's six operatories in there and two more surgical oriented oriented dental suites. This concept in general is actually very different. So it's an entrepreneurial doctor. When he was in dental school, he formed his own online supply company and did very well and then sold that. And this is really his next venture. But his vision is for dentistry to be handled under the care of a single general dentist, but then to have all of the endo, the ortho, the perio happening under the same roof and under the guidance of the same dentist. So the general's not doing all that work, but all the specialists come to the patient. As opposed to the traditional model where patients who need specialty dental work are often given a referral.

Exactly. And then you end up going to somewhere else in town and wondering if your records made it back to your general. So this is a really unique concept that's patterned off of the concierge doctor model in the physician space.

Now a very, I could say a niche requirement that you were able to fulfill for your client.

Yes.

That in itself speaks volumes.

Yes.

Regarding. So regarding this practice with six operatories and two surgery rooms, would you say this is kind of the norm that you're seeing with the asks these days? Or I guess what I'm asking is how big or small of.

Are the.

Practices getting these days?

Yeah, good question. I would tell you this one is definitely on the larger side. For dental offices, 4,400 square feet is a. Is a pretty large undertaking if you think about it. You really need to have, you know, a very well established practice to be able to justify that kind of rent.

Right.

In this case. And this dentist is just starting up this concierge practice. His requirement for us was to find a space where the infrastructure, the dental infrastructure, was largely in place. And so we found a former implant clinic. And it wasn't the kind of thing where we could divide the space. And so what he decided to do was take all of the space and fill it with the specialists in his practice. And so he's not just bringing his own patients to the table, but all of his specialists then have the, the freedom and the ability to Practice out, out of this office. To answer your question directly, Ash, I would say the typical dental office we're seeing would be 2,000 square feet on the small side and probably 3,000 to 3,500 square feet on the large side.

So I'll give you a little trick of the trade. We in the brokerage community typically use 400 square feet per as a benchmark. So if you have a 2,000 square foot space, you're going to comfortably be able to fit five operatories in there. If it's 1800, you'll also be able to get five in there. But it has to be a very efficient layout and you're going to be feeling a little bit tight on storage for your bibs, cups and gloves. By the same token, if you do a 2,200 square foot space, you're on the borderline of being able to take, you know, six operatories and be tight or five operatories and have a really nice service lounge for the, for both the patients and maybe a different lounge for the providers.

Yeah, that makes sense. And then with the 1800 square feet, if they decide to put in, let's say five operatories, you think there's room for a lunch room maybe.

So the short answer is it can be achieved. The challenge you have is depending on the way the space is laid out. So not all spaces are laid out equally. So if you have a rectangular layout, you're either going to have an aisle, you're probably going to have an aisle down one side of the space and operatories down the right or the left hand side, that aisle is going to take up quite a bit of your space. On the other hand, if it's more of a square space, and we really prefer square spaces because it gives you the most flexibility to structure the exam rooms around the perimeter and then it gives you some room in the middle for, could be records keeping, could be a patient consultation, could be the front desk. So the short answer is if you have a good square 1800 square foot space, we can probably get you a nice, or at least a small employee break room in there. If it's rectangular, it we just would have to see the layout and deal with whatever the unique nuances of the space are.

I see, okay, that makes sense. Now let's say Instead of the 1800, they go with the 2200 and they don't try to squeeze in a sixth operatory room. They just stick with their original five but with that additional space they decide to, you know, have a separate room. Because you mentioned you know, dental clinics are catering more to the experience.

Yes.

They're treating it more like a spa.

Yes.

And I've seen some dental clinics do this, and I guess I'm just wondering if maybe they expand their services outside of dentistry to maybe facial aesthetics by providing, you know, Botox or something and they utilize that space for that.

Very, very good point. Yes. And when you talk about something that's very different from dental offices today than 10 years ago. Yes. It's very much. We're seeing the conventional dentistry expand outside and push the envelope on more of the aesthetics, and that could extend beyond cosmetic dentistry to Botox and fillers and laser treatments, et cetera. We're seeing that 2,200 square feet for five ops, and some of that other additional service line may still be a little bit tight. What I would tell you is that in a 2,200 square foot space, if we're still going to have five ops, one of the most popular uses of that extra square footage is the patient consult.

Right. It's a room that's usually right near the front desk. It's got usually some soft lighting in there. It has a television monitor and some chairs and a desk. And what it really enables the dentist to do is to sit around that desk with the patient and maybe a family member or two and map out the case. Right. What are they seeing? What challenges lie ahead? What is the treatment plan? And they're finding that they can do that again in a less clinical environment than when they're actually sitting in the chair under the harsh light of the work light, if you will. And it's a much more conducive environment for the conversation of, hey, this is the treatment plan that we think will work for you.

And it's going to be a long term investment in terms of both time and money.

That makes sense. Speaking of time and money, let's say we're dealing with a dentist who believes in working towards a legacy. Right. Initially, they lease out the space, but with the intention that maybe some time down the road they may want to buy out the building they're operating out of.

Yes.

Are there anything specific to look out for in the lease agreement that might aid them with this future want?

So, great question, Ash. Let me, let me go 60,000ft on you first and then I'll narrow in on your, your answer. So I, I think that we get asked the question all the time, should I buy or should I lease? Okay. The way to really discern the answer to that is to look at what your Practice goals are right. So if your practice goals are to expand and grow and have more locations than just this one, or if you're in an area, let's say in the Nashville area, where people are moving there at a rapid, rapid rate and there's just net new patients all over the market. And so growth is definitely key in a situation like that. We recommend leasing because if your office is going to grow significantly, you're going to need the capital to be able to expand. And while we love real estate as an investment, it's more for the slow growth practices to kind of, you know, situate down with owning real estate.

So we recommend to our clients that, that buy real estate if you don't think the practice is going to expand. Or alternatively, if you have kids coming up in the system who either are in dental school or may go to dental school and are interested in taking over your practice, like those are the things that really tip you off that buying would be a good thing. But if you think your practice is just going to be a rather, you know, rapidly growing practice, then we recommend again leasing because leasing gives you the flexibility to grow and expand. Now let's take that to your question. So whenever you lease, you can put in clauses into the lease that are called rights of first refusal or rights of first offer. So those are rights that allow you as the tenant to have some say in the future of your space or the building itself. It just depends on if you do a right of first refusal to purchase the practice or a right of first refusal to lease additional space. Both are a great idea to incorporate into your lease because they build in that flexibility.

But the way a right of first refusal works is if an owner of your building decides to sell, a right of first refusal means that they have to come to you if they have an offer in hand and say, doctor, we've got an offer in our hand. The price is this, are you interested in buying it as opposed to this other party? And the rights usually come with a certain number of days to get back to them with an answer. Five days, 10 days, not a huge Runway, but enough for you to be able to step in and say, yes, I want to take that on. So we strongly recommend building those into every lease. Even if you are in the rapid growth category and you're not so sure that you want to buy, it's still really good to protect your options long term.

That's right. And speaking of long term, let's say the plan isn't to own the building, but still to think about securing some kind of an investment towards the retirement. Right. And the practice. Let's say this dentist only owns this one practice.

Yes.

And is wanting to consider all kinds of factors that's going to help him maximize this investment. Would you say there are certain components to the space that they're leasing out that they should pay attention to, in other words, that will help them add more value to the practice when they do decide to sell?

Yes. Actually, that's a really insightful question, Ash. And there are multiple layers to it, Right. So the first thing that you should look at is we are not a big fan of purchasing condos, okay. The reason for that is that if you purchase a condo, you are limited by the four walls of your space. And if per chance you need to get out, either to relocate to a new building altogether, or if you need to expand because of growth, you're hamstrung because you have to sell that condo first to free up your capital. And generally the market for condos is a little bit soft. If you are looking to buy, we highly recommend buying a building.

Either a freestanding building where you own and control the land and aren't at the whims of a condominium association to control your destiny, or we recommend buying a multi tenant building, as you had suggested, Ash, in your first question, whereby you can run your practice out of the building and have other tenants help defer the cost of your mortgage payment. So those are favorable things to look for if you are renting and you're looking about the desirability of the practice. Renting in a condo really kind of provides the same concerns, Right. The only place you can really go if you want to acquire your business is to approach the owner of that condo. And then again, all you're doing is purchasing condo as opposed to having a building that you can exert total control over. Going back to the other layer of your question, which is what can I do to improve the saleability of my practice? So think about two different dental offices, okay? The first one is with a great dentist who you've known for years. He's been in the same building. He hasn't really updated, you know, the, the building it still has or his, his space, you know, it still has the old blue sinks and the old Formica countertops and, you know, kind of dingy lighting, right? Now compare that to another doc who is equal in stature and you may love this dock just as much, but he has a beautiful modern practice with a water effect in the lobby or the waiting area.

There's granite countertops. There's really nice LED lighting that really brightly lights the space. The equipment is new and everything is just fresh and clean and modern. So when we, you know, we actually have a very close relationship with DDS Match and they are the ones who sell dental practices. So when we work with them, we, we try to get evaluation. And typically what we find is that there's three major components that value that comprise the value of a practice. One third is your patient base or known as your goodwill. One third is your equipment, so your chairs, your handheld pieces.

And the other third is the real estate itself. What does it look like? So if you think about it, Ash, 33% of somebody's decision to buy your practice is all about the look and the feel and the aesthetic of your office. And so therefore, you really do want to be cognizant of what do your patients see when they come into your office. And if you've been coming to the same office with no changes for 10, 15 years, you know, have a friend come in and look at your office and how it shows through their lens because that's really going to be telltale as to the desirability of purchasing your practice. Now I will tell you there's great news in this story, okay? If you are one of those dentists or specialists that has been in your office for 10 years, or let's just say eight years and you had a 10 year lease, when your lease comes up for renewal, landlords really want one thing and one thing only. They want stable tenants. They don't want turnover. They don't want to have to pay to put a new dentist in your office.

So as a result, if you are approaching the last year or two of your lease, or even if you have four years left, but you're willing to extend your lease for an additional five beyond those four, then we as brokers can go in and really go to bat for you. We can get those landlords to invest the dollars that they would have put into a new tenant into your space. And we as a firm have had great luck at this over the years, getting brand new waiting rooms, new carpeting, new paint, fresh lighting. And you'd be amazed at how for putting little or no investment into your own space out of your pocket, simply by the act of renewing your lease, we can give you a completely refreshed place to look and you don't even have to move of.

Yeah, I'm glad you actually brought it up. I'm guessing you're talking about TI allowing right upon renewal.

Yes. So we in the brokerage community love to call it TI in plain English, that means tenant improvement allowance. And these are funds that a landlord is willing to pay out of their pocket to either attract and receive, attract or retain their dental tenants. And because dentists typically sign long term leases, 10 years, almost always on a new lease, and five year increments on a renewal, you have to recognize to all of Ash's listeners that you represent a hugely valuable piece of their property and they are willing to pay through the nose to keep you. I just encourage you, whether it's resource, commercial or any other firm, though, to connect with a professional broker that understands the ins and outs of the lease renewal process because they're going to be able to maximize your value. Please do not go it alone. Work with a professional and you'll be very, very happy with the outcome.

Yeah, no, good point. Now, do you see any shifts in suburban versus urban demand?

Man, that is a great question, Ash. It's interesting, you know, ever since COVID our urban centers, the larger cities have really been, you know, a little bit under duress, right? So large office tenants have downsized, have moved out to suburban locations. And what that has led to is, you know, in urban areas, Dennis used to benefit greatly from the high concentration of professionals that could zip out of the office on a lunch hour, go and have their checkup, and then go back to work. So in Chicago, where I live, you know, we've seen as much as, you know, a 25 or 30% drop in the traffic in downtown Chicago in our CBD. So if you think about it, those dentists were already paying a premium rent to be in that area because they had great exposure to such high density patient traffic, right? And now if all of a sudden 25 or 30% of that disappears, it becomes a lot more challenging to be in an urban area. What I will tell you that, you know, in suburban areas, where actually a lot of professionals have started to work either from home or to get small offices closer to where they live so they don't have the downtown commute. We are definitely seeing lots of new office openings. The one thing you have to know is that on a net.

Net basis, believe it or not, there's still a relatively thin supply of medical office space. And so rents have definitely been going up in suburban medical. It's interesting, we have a listing in Oak Park, Illinois, sorry, Oak Lawn, Illinois, down on the southwest side of the city. And this listing is a former retail center that was converted to medical. And so it's really nice because the patients can just park in front of the space, just walk in, no elevator, et cetera. And this center, you know, the landlord just took it over. They're starting to put some money into it and spruce up the look of it. But even without them putting any improvement dollars into the facade, we are inundated with calls.

We had a vacancy, we've had probably a dozen or more really interested tenants and we just signed a lease and now we are fully. So again, I would recommend that if you're going to try to get into the suburban market, recognizing that competition for spaces, especially what we call second generation spaces that have already been built out, you are really going to need a broker to guide you and direct you and be on top of it so that when your ideal space comes on the market, you're ready to pounce.

That's a good point. Yeah. You know, that, that's, that was my impression as well, that from 10 years ago, five years ago, I have seen a shift in towards the dentist wanting to find a location that's close to where they live. And since living expenses and the values of, you know, home real estate has gone up, they tend to, you know, live a little further out from the city. And of course, traffic is another consideration. And then once they buy their house, they want to find a practice that's close to their house. You know, typically a 20, 30 minute commute at most.

Yes.

So, okay.

One of the, one of the things that Covid did is it really made it okay to work from home. And what's interesting, and dentists are no different than conventional office tenants, but one of the things that people saw, and one of the, the reasons why they're so attracted to either working from home or working close to home is that they, they took a look and they said, wow, I used to spend, fill in the blank, 30 minutes, 40 minutes, an hour and 20 minutes commuting both each way. Right. And so think about the power of suddenly putting one to two hours of what used to be commute time back into your day. What can you do with that time? Go work out some more, spend time with your family, maybe take on some extra patient load, or you know, really be efficient about your non patient time where you're catching up on records and such. So that has really taken hold, Ash. And I think that your perception is spot on that, you know, dentists and dental professionals, just as much as conventional office workers are really relishing that close proximity to their office.

I agree, of course with COVID I think People have started valuing other things than just monetary compensation. I feel like it was like a wake up call for a lot of people. I mean, even in my industry, I get clients that will call me and ask me to come up with a financial plan that allows them to spend two hours more per week with their daughter and not like, okay, this is the amount of money I want five years from now in my retirement plan. So it's. It's interesting.

So. And Ash, going back to your original topic of this session, which is, what are the trends that we're seeing in design? All right, so what you just said is correct. So one of the places people find respite is in more time. But the other place that is hugely responsible for, for providing good feelings and good attitude is your physical surroundings. So remember, you're probably, if you're a dentist working five days a week, gonna spend more time in your dental office than you are in your home over the course of your career. So it might as well be a space that when you open the door, you absolutely love coming to. So it's just as important for your psyche and for your patient's psyche and for your employee psyche that you have an office that is just a beautiful space within which to work.

Yeah, yeah, I would have to agree. So we're towards the end of our episode, and I have one last question for you, Mark.

Certainly.

What is the biggest real estate mistake you see dentists make, and what's one thing you wish more dentists understood before signing a lease?

Boy, that's a great question. Well, the first thing I would say is trying to think that you're going to save a buck by going in and negotiating with the landlord without representation. First of all, that's a myth. There is a commission built into every transaction that covers both the tenant side and the landlord side. And by the way, we've primarily been talking about leasing, but for those of you who are buying a building, it's the same if you're on the purchase side or if you're on the sales side. There's a commission built in on both sides. So if you choose to go unrepresented, you do not get to take advantage of the knowledge of a broker. And you really, that money that you think you're saving is really just going into the pocket of, of your landlord's broker or the seller's broker.

So please, please bring professional help with you. I will say that within that, probably one of the most damaging clauses that we see that Dennis would overlook is what we call the demolition relocation clause. So think about this. Right now it costs about $250 per square foot to build out a dental office. So that means if you're taking 2,000ft, it's going to cost you a half a million dollars to build that out. And obviously if it's larger, it's going to be even more so. When landlords have a demolition clause, they are allowed to terminate your lease early because they want to demolish the building, or if there's a relocation clause that states that they're allowed to relocate you anywhere in the building. And those clauses usually say that they will put you into a space that is largely comparable to your exist existing space.

But think about it, you've just spent a half a million or more on your space. Most likely the landlord is going to see that replacing your space in kind is far too expensive for their pursuits. But if they have this clause in your lease, there is nothing you can do about it. And so again, working with a professional who knows the ins and outs and things like the need to have a demolition, non demolition, non relocation clause, these are the things that you gain by working with a professional broker who knows the dental space inside and out.

Perfect. That's good to know. Honestly, I didn't even know that. So that's. I was in my mind thinking, no, no, they can't make me do that. If I was a dentist. I mean, I selected this space because all the operatory rooms, they're plumbed and I spent all this money. What if this other place doesn't have all of that?

That is always a concern, Ash. We always have to be on the lookout for landlords. Landlords come in all shapes and sizes and all levels of scruples, right? Some landlords are very fair, but a lot of them will try to catch the unsuspecting doctor on things that, you know, are second nature to, you know, to a broker. And so I guess the parting words I would leave with all of your listeners is please work with a professional who understands this space inside and out. Because real estate is complicated and you need somebody on your team making sure that you are going to get the best deal possible for your practice.

Fantastic. Well, thank you for your wisdom and sharing all your insights with our listeners and with myself today. It was a real pleasure, Mark.

Thank you, Ash. I appreciate the opportunity to be on the podcast.

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