Real estate is one of the largest financial commitments you’ll make as a practice owner. Most dentists approach it without any background in commercial leasing, and that gap tends to be expensive.
Mark Storey, President of Practice Real Estate Group’s (PRG) Central Texas market, recently joined the Dental Amigos podcast to walk through the decisions that shape a practice’s long-term trajectory – from site selection to lease structure to planning for what comes next. Here’s what came out of that conversation.
Is your location decision based on data or instinct?
The dentists who struggle in a new location are often not struggling because of clinical issues. They opened in the wrong place – too much competition, the wrong patient demographics, a market that wasn’t growing.
PRG starts every site search with what they call a competition circle map – overlaying three-mile radius circles across a market to identify where competition is lowest, and population density is highest. From there, the analysis goes deeper: do the demographics in this area match the type of practice you’re building? A fee-for-service practice and a PPO practice are not looking for the same neighborhood.
Growth trajectory matters as much as current conditions. An area with more competition can still be the right call if the dentists already there are approaching retirement. Knowing your competitors’ approximate ages, Google reviews, services offered, and provider count gives you a real read on where the opportunity actually is. A growing market with below-average competition is where you want to be for a 10-year lease.
Do you know who’s actually representing you in a lease negotiation?
When you drive past a space and see a listing broker’s name and number, that broker represents the landlord. Calling them directly does not save you money – the landlord’s broker gets paid either way. What you lose is your own representation.
A dental-specific real estate advisor knows what a dental lease has to include. Dental build-outs are among the most complex of any commercial tenant. Power requirements are significantly higher than those of a standard office. Plumbing means saw-cutting concrete, laying pipe, and repouring. Build-out costs typically run $150 to $250 per square foot, depending on the market.
Beyond construction, dental leases require careful attention to assignment and subletting language – what happens when you eventually sell the practice. A general commercial agent may not know how to negotiate that. A dental-focused advisor does, because they’ve worked through what happens when those provisions are missing at closing.
Do you know what tenant improvement allowance actually covers?
TI – tenant improvement allowance – is one of the most important and most misunderstood parts of a dental lease.
The improvements you make to a leased space – HVAC, electrical panel, plumbing rough-in, walls, flooring – add permanent value to the landlord’s property. The TI allowance is their contribution toward those costs in exchange for a signed lease that delivers them income over time. It’s a negotiated offset, not a grant.
A practical benchmark: aim for roughly two times your base rent in TI. If your base rent is $30 per square foot, a strong negotiation targets around $60 per square foot in TI and other concessions. Additional concessions include free-rent periods during build-out, which extend your runway before lease payments begin.
The landlord calculates this from the other direction – they look at total income over the lease term and work backward to what they can offer while still hitting an acceptable return. Getting close to that number without losing the deal is exactly what an experienced advisor is positioned to do.
Are you building for where the practice is going, not just where it’s starting?
Two things Mark hears often from new clients: “I want to do this as cheaply as possible,” and “put me where I’ll make the most money.” Neither is a real strategy. The more useful question is what the practice looks like in 10 years.
If you plan to open multiple locations, a smaller first practice – five or six operatories – preserves capital for future build-outs. Fewer than five creates problems on the transition side; most buyers in the dental M&A market want to see at least five ops in a practice they’re acquiring.
If this is your one location for the foreseeable future, the math shifts. A practice that grows faster than expected can run out of capacity before the lease ends, and in a leased space, you can’t simply expand. Building out for six, seven, or eight operatories upfront – even if you only equip a few initially – keeps options open without forcing a costly move before your loan is paid down.
On that point, most dental startup loans are 10-year terms. If you’re five years in and still owe $550,000, the economics of building out a new space rarely work in your favor. Matching your lease term to your loan term also gives you negotiating leverage – a longer commitment gives the landlord more income certainty, which means more room on TI, free rent, and other concessions.
Start evaluating your next real estate move around year seven or eight of your current lease, when you have time to make a deliberate decision.
Are you starting the real estate conversation early enough?
Mark’s position on timing is consistent: connect with a dental real estate advisor early. Not six months before you want to open – two to three years out if you’re still forming the plan. Early access to demographic data, competition analysis, and market research produces better decisions at every step that follows.
