Thinking of converting a building into a clinic?

Thinking of converting a building into a clinic?

Explore the legal and economic realities before you commit
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Feb 01, 2009

The prospect of building an all-new practice facility is a daunting one, especially for veterinarians who have not owned a practice before. There are good reasons to be hesitant and thoughtful.

Much like the retirement-age couple who look at a beautiful vacant lot with an ocean view, a vet's initial excitement over a naked piece of commercial property can be huge: How would it look with my dream building on it, equipped with all the gadgets and colors that I have always envisioned? A vacant lot represents a blank slate, with only sufficient financing standing between the buyer and an environment he would love to inhabit every single day.

But then reality sets in — either at some loan officer's desk or in the privacy of the doctor's own kitchen where the "penciling" begins. The lot costs "X," the builder quotes a comfortable "Y," but — oh, man! — look at the variable "Z's!"

In this equation, "Z" equals about 130 percent of the sum of:
  • Legal fees for zoning compliance
  • Sewer and water hook-ups
  • Driveway/parking paving
  • Storm-water engineering charges
  • Electrical service installation for HVAC and X-ray equipment

And so on. It never seems to end. In some municipalities, there is even a requirement for traffic-flow impact statements which may or may not lead to permission for entrances off the main road. And, local permission doesn't ensure state DOT approval if the main drag is a state or U.S. highway.

Worry and economic constraints may not stop the project in its tracks, but if they do the next stop often is a tidy-looking old pizza or muffler shop that "might work great for the new practice." That thought, of course, is our jumping-off point.

Converting an existing building into a veterinary practice can be an excellent alternative to new construction. But it is a project to be undertaken with no less circumspection and "penciling" than new construction.

Cost comparisons

I have built new buildings, and I have renovated old ones. What I know from these experiences is that it is entirely possible for the square-foot construction cost of a renovation to exceed that of building from scratch. How is that possible?

While new construction inevitably involves additional site-preparation work, external wall materials and so on, renovations are very labor-intensive. As we all know from reviewing our annual payroll, it is people — not materials — that generally are the most expensive part of any commercial enterprise. This includes overhauling some little former restaurant.

Any of you who have attended one of my CE lectures knows that I always use "muscle car" metaphors to clarify my points. That analogy couldn't be more apt than in the realm of clinic construction. Consider this comparison:

When GM built the 1970 GTO, it put the thing together and got it to the showroom with a sticker price of about $4,000. That's about $20,000 in 2009 dollars.

Assume that you inherit that same GTO from a relative but you want to restore it to make it safe and reliable. The restoring of that car to the condition in which it left the factory would include a labor charge alone of about $75,000 (or three times the cost of a brand-new 2009 car).

Veterinary clinics fashioned from former doughnut shops work the same way. When you wire a new building, there is no sheetrock to work around, just as wiring harnesses in cars are put in before the dashboard. When a restaurant is turned into a new use, asbestos may need removal because it is a safety hazard. Similarly, you need to replace the non-tinted windshield on a muscle car with one that has the 2009 mandatory tint for safety and legal compliance.