The Dentist’s Essential Guide to Commercial Real Estate

By Nick Zagar · CEO and Managing Director, Mirlo Real Estate Partners

The short version. Commercial real estate has its own language, its own timeline, and its own traps — and most dentists meet all three for the first time with hundreds of thousands of dollars on the line. Three rules carry most of the weight: start 10–12 months before your target move-in date (12–18 for ground-up construction), keep multiple properties in play so landlords compete for you, and get tenant-side representation — which the landlord pays for, not you. This guide covers the rest: the lease types, the jargon, the nine-step process from needs analysis to move-in, and the seven things landlords hope you never figure out about renewals.

WHY WE WROTE THIS
We’re advocates for dentists. Mirlo represents commercial tenants and buyers only — never landlords or sellers — so there’s no conflict of interest anywhere in our work. And after 1,100+ transactions, we’ve learned something simple: educated tenants and buyers make the best decisions for their practices. You don’t need to become a real estate expert. You need to know enough to recognize a good deal, a bad one, and the difference. That’s what this guide is for.

If you’re past the basics and want the deep negotiation benchmarks — actual TI allowance numbers, free-rent structures, personal guarantee terms from our SE Michigan deal book — those live in our Dental Office Lease Negotiation Guide. If you’re weighing ownership, the Buy vs. Lease decision framework runs that math. This guide is the foundation under both.

THE THREE LEASE TYPES
Not all leases are created equal, and the base rent number on a listing tells you less than you think. The difference comes down to which operating expenses are included with the base rent. Operating expenses — “nets” in the jargon — are three things: common area maintenance (CAM), property taxes, and the landlord’s insurance.

Gross leases include all or most operating expenses in the base rent. The most inclusive version is Full Service Gross (FSG). You’ll see these at high-end properties selling an all-inclusive experience, or with small landlords who like simple leases.

Net leases exclude all or most operating expenses from the base rent. The least inclusive version is Triple Net (NNN) — very common in medical office, retail, and industrial buildings, because it shifts the risk of rising expenses onto tenants.

Modified Gross (MG) sits in the middle. Common in office buildings: all expenses are included for the first year (the “base year”), and the tenant pays the increases above that in the years after.

Why base rent alone lies
Because the lease type determines what’s in the number, a lower base rent can be the more expensive deal. Watch:

• Property 1 — $25.00/SF, Full Service Gross. Operating expenses included. Year 1 total: $25.00/SF.
• Property 2 — $18.00/SF, Triple Net. Plus $8.00/SF operating expenses. Year 1 total: $26.00/SF — the “cheap” listing costs more.
• Property 3 — $23.00/SF, Modified Gross. Expenses included in the base year, increases only after. Year 1 total: $23.00/SF — the actual cheapest.

Property 2 advertised the lowest rent and costs the most. Always convert every option to total occupancy cost per square foot before comparing. This is the first mistake we catch when a dentist brings us a deal they negotiated alone.

Pro rata share
In multi-tenant buildings, operating expenses are usually divided by “pro rata share” — your space’s square footage as a percentage of the building. A 6,000 SF tenant in a 50,000 SF building pays 12% of shared costs. Bigger tenants pay more. It’s fair in principle; the fights are over what goes into the expense pool, which is a negotiation topic covered in the lease negotiation guide.

HOW COMMERCIAL RENT ACTUALLY WORKS

Commercial rent isn’t quoted monthly like an apartment. It’s quoted per square foot, per year — which makes different-sized spaces comparable once you know the formula.

Yearly rent = square footage × (base rent + operating expenses, if you pay them). Monthly rent = yearly ÷ 12.

Two examples:

• 5,500 SF at $25.00 FSG: 5,500 × $25.00 = $137,500/year, or $11,458/month.
• 6,000 SF at $18.00 NNN + $8.00 expenses: 6,000 × $26.00 = $156,000/year, or $13,000/month.

The “cheaper” $18.00 space costs $1,500 more per month. Run this math on every option, every time.

Usable vs. rentable square footage
If you measured your space wall to wall, you’d get a smaller number than the listing says. That’s not an error — commercial real estate uses two figures:

Usable square footage (USF) — what’s actually inside your walls.

Rentable square footage (RSF) — what the landlord bills you on: your usable footage plus your share of the building’s common areas (lobbies, corridors, shared restrooms). The markup is called the load factor.

Example: a 5,500 USF space in a 50,000 SF building with 6,000 SF of common area carries a 12% load factor — so you pay rent on 6,160 RSF. More common space in the building means more rent for the same four walls. Ask for both numbers on every property you tour.

NEGOTIATING A LEASE

Everything on a listing is a starting point, not a price tag. Negotiations formally begin with one of two documents:

Letter of Intent (LOI). A non-binding offer from you to the landlord, outlining the key terms before anyone drafts a lease. If the two sides can’t agree on the LOI’s deal points, there’s no reason to pay attorneys to fight over lease clauses.

Request for Proposal (RFP). Also non-binding, but postured the other way: instead of you opening with specific numbers, the landlord fills in the blanks first. RFPs shine when you have multiple good options and time to let landlords compete.

Which to use: LOIs for renewals (the current terms are already established), purchases, and when time is short. RFPs when you have many choices, plenty of runway, and no favorite — the pressure sits on the landlord to be compelling.

The deal terms that matter
Beyond the obvious line items — size, base rent, lease type, escalations, term length, deposit, commencement dates — your proposal negotiates these:

Exclusivity. Also called a non-compete: the landlord can’t lease space in the property to a competing use. For dentists in multi-tenant buildings, this is not optional. Name the prohibited uses specifically.

Tenant improvement allowance (TIA). The landlord’s contribution to your build-out — construction labor and materials only, not equipment or furniture. This is usually the biggest concession on the table. Our current SE Michigan benchmarks are in the lease negotiation guide.

Rent abatement. Free rent, usually at the start of the term, to offset construction and moving costs. How you time it against your build-out and insurance credentialing matters more than how many months you get — that timing framework is in the negotiation guide too.

Renewal option. Your right to extend past expiration, with its own clause in the lease. Negotiate the renewal formula now, not in year ten.

Personal guaranty. You, personally, backing the lease if the practice can’t. Standard for startups — and if you’re a startup, expect to guarantee the full term. The landlord is fronting six figures of TI on a practice with no operating history. We push for burn-offs and rolling caps where the deal supports it.

Right of first refusal (ROFR). First priority to buy the property or lease adjacent space if it becomes available. Matters most if you project growth.

Signage. Three categories — suite, monument, building. Prioritize and put your requests in the proposal, not in a phone call after signing.

Landlord’s work and tenant’s work. Who builds what, before and after you take possession. Spell out electrical, plumbing, and HVAC requirements — dental spaces are not typical office space, and vague language here becomes your change-order budget later.

The three start dates (and two end dates)
Between signing and moving in, three different dates do three different jobs, and they’re rarely the same day:

Lease execution — the day both parties have signed. Lease commencement — the day the lease terms take effect. Rent commencement — the day you actually start paying, which lands later when you’ve negotiated abatement.

On the back end, two dates run your leverage clock: lease expiration and the renewal option deadline — the date after which the landlord can refuse your renewal entirely. Calendar both the day you sign, with reminders 18 months out. Timing is leverage, and these dates are the clock.

LEASE RENEWALS: SEVEN THINGS LANDLORDS WANT YOU TO BELIEVE

Renewals are the most routine transaction in commercial real estate, and the most quietly expensive. A bad renewal costs tens to hundreds of thousands over the term. Here’s the mythology, and what’s actually true.

1. “We’re on the same team.” The friendliest landlord in Michigan is still financially motivated to charge the maximum rent the market allows. Your interests are directly opposed. That’s not cynicism; it’s the structure of the deal.
2. “You’re already below market.” Maybe. But a below-asking rent isn’t automatically a good deal — asking rents reflect the landlord’s vacancy, their building’s condition, and their plans, not the market. Every renewal warrants a full market analysis.
3. “Here’s an easy one-page renewal.” The easy-to-sign amendment with a continued escalation is a tactic aimed at busy tenants. The landlord’s first offer is not the landlord’s best offer. Easy saves time, not money.
4. “Renewal terms aren’t negotiable.” Even pre-negotiated renewal-option terms are negotiable. The landlord must honor them as a minimum — but you can push for better if the market supports it.
5. “Renewing is always cheaper than moving.” Often, but not automatically. Other landlords pay real money — TI, free rent — to attract new tenants. Sometimes the math favors the move. You only know if you look.
6. “You have no leverage.” A landlord who loses you faces months or years of vacancy, plus TI and commissions to land your replacement. That’s your leverage. Use it.
7. “You’re not allowed to hire your own agent.” Flatly false, and a tell that the landlord profits from you being unrepresented. Tenants always have the right to representation — and the landlord pays the commission either way.

Start renewal conversations 12–18 months before expiration. Inside 90 days, most of this leverage is gone.

BUYING: THE LANGUAGE YOU NEED

Purchases split into two categories: an existing building or condo (foundation in place, cheaper and faster to convert) or land for ground-up construction (fully customizable, brand new, and at least 12 months longer once municipal approvals enter the picture). Both require a due diligence period, zoning compliance, and environmental clearance for licensing and lender approval.

The vocabulary you’ll hear:

Purchase Agreement (PA). The binding contract with all terms and every due diligence deadline — each one an exit door for buyer or seller before closing. An LOI negotiates the big terms before anyone drafts the PA.

Earnest money. Upfront funds from the buyer, held by a third party (usually the title company), applied to the purchase at closing or refunded/forfeited at defined milestones.

Bill of sale. Transfers any personal property — furniture, equipment — included with the building.

Estoppel certificate. If the building has existing tenants, this signed statement verifies their lease terms, so you know exactly what obligations you’re inheriting as the new landlord.

Due diligence on an existing building runs about five weeks: title work, survey, inspection, seller’s disclosures, environmental assessment, and finalizing build-out plans with your architect. Land takes longer — the municipality gets a vote.

Buy vs. lease at a glance
Buying: down payment at closing (0–25% — healthcare-specialty lenders offer 0%-down programs to practice owners), building maintenance responsibility with rental-income opportunity, fixed-rate stability, equity and appreciation, interest and depreciation deductions, and the independence of ownership. Leasing: first and last month plus deposit at signing, TI allowance funding your build-out, flexibility to move as you grow, landlord-managed property, and fully deductible lease payments.

There’s no universal answer — career stage, capital, and submarket decide it. We’ve written a full decision framework with the SE Michigan numbers.

THE TEAM YOU’LL HIRE

No dentist does this alone. A full transaction involves your commercial real estate agent (usually the first hire — partly because we’re most useful early, partly because we know who to recommend for everything below), a commercial lender, a real estate attorney, an architect, a general contractor, and your equipment, IT, and furniture representatives. Purchases add an inspector, an environmental assessor, and a civil engineer or surveyor. Many practices also bring a marketing consultant for the opening.

The right team has done healthcare projects together before. Half of what you’re paying for in an experienced tenant rep is the rolodex.

THE TRANSACTION ROADMAP: NINE STEPS

1. Needs analysis. Define the space requirement before you look at a single listing. The sizing rules of thumb for dentists: a single-practitioner general practice runs 1,800–2,400 SF; orthodontists slightly more at 2,000–2,500 SF; endodontists can work in 1,500–1,800 SF. The quick math: number of operatories × 400 SF. Five operatories ≈ 2,000 SF. A standard operatory itself is about 126 SF. And because a dental lease will likely run 10–12 years, size for the practice you’ll have in year eight, not the one you have today — or prioritize buildings with adjacent expansion space. Beyond size: your business vision, design and brand, demographics and competition, parking, visibility, access, budget, and location convenience for you and your staff.
2. Pre-approval for funding. Talk to a lender early — ideally one that specializes in healthcare practices. Pre-approval defines your realistic range and strengthens every offer you make.
3. Market search. Your agent pulls everything viable — including off-market options a public listing search won’t surface.
4. Property tours. Tour the top choices; then tour the finalists a second time with your architect, contractor, or equipment supplier along to pressure-test layouts. One warning worth its own sentence: listing agents will try to learn everything they can about your situation and motivation. Don’t reveal too much — route the questions to your own agent.
5. Offers and negotiations. Submit LOIs or RFPs on your top two to four options — plural. Competing offers are your leverage, and they’re also your insurance if a build-out proves infeasible or a landlord proves impossible.
6. Contract review and signing. Leases are drafted to favor landlords. A real estate attorney — specifically a real estate attorney, not your college roommate who does estate planning — tips the scale back: they know the documents, the clause language, and the deadline choreography.
7. Space design. Your architect turns the needs analysis into a test fit — a concept sketch you’ll use to visualize the space, request construction quotes, and compare finalists on real numbers instead of vibes.
8. Construction. The architect’s drawings go to the construction team; the build runs multiple months with recurring check-ins. Your furniture, technology, and dental equipment vendors work in parallel.
9. Move-in. Keep your staff informed, tell your patients early and often, treat the opening as a marketing event, coordinate service-provider cutovers, do a detailed walk-through with the general contractor before accepting the space, and update your address everywhere before the boxes arrive.

The timeline
From a standing start: needs analysis in week 1, funding pre-approval and market search in weeks 2–3, tours in week 3, offers and negotiations in weeks 4–7, contract review through signing in weeks 7–10, space design in weeks 7–11, and construction from week 11 to week 33 or beyond. Call it eight to twelve months, door to door. Add at least 12 months for ground-up construction. More decision-makers, bigger spaces, and municipal approvals all stretch it further — which is why the next section starts with timing.

THE THREE PILLARS

Everything in this guide rolls up to three things.

Timing. Start too early and landlords won’t negotiate seriously — no pressure yet. Start too late and the pressure is all on you: you’ll settle, or pay for the privilege of being cornered. The sweet spot: begin 10–12 months before your target move-in for new locations and relocations, 12–18 months for ground-up construction, and 12–18 months before expiration for renewals.

Posture. Landlords offer favorable terms to tenants who can credibly walk away. Multiple viable options is what makes the walk-away credible — and it’s insurance when option A falls through, which happens more than you’d think.

Representation. A tenant rep advocates for you and quarterbacks the entire transaction while you keep running your practice. Real estate is typically the second or third largest line item in a dental practice’s budget, and each deal echoes for a decade. Here’s the economics most dentists don’t know: landlords and sellers set aside commission funds for every listing, split between both agents. Your representation costs you nothing — going unrepresented doesn’t save the fee, it just hands your half of the table to the other side. When you interview agents, look for tenant-and-buyer-only representation with healthcare experience. We’ve written an honest guide to choosing between national and boutique firms, including when we’re not the right fit.

FREQUENTLY ASKED QUESTIONS

What’s the difference between a gross lease and a triple net (NNN) lease?
A gross lease includes operating expenses — CAM, property taxes, landlord’s insurance — in the base rent. A triple net lease excludes them, so you pay base rent plus your share of expenses. NNN is the most common structure in medical office buildings. Never compare properties on base rent alone; convert everything to total occupancy cost first.

How is commercial rent calculated?
Per square foot, per year — not monthly. Yearly rent = square footage × (base rent + operating expenses if you pay them); divide by 12 for monthly. A 6,000 SF space at $18.00 NNN with $8.00 expenses costs $156,000 a year, or $13,000 a month.

Why is the advertised square footage bigger than the space I measured?
Landlords bill on rentable square footage — your usable space plus a share of the building’s common areas, called the load factor. A 5,500 SF space in a building with a 12% load factor bills as 6,160 SF. Ask for both numbers.

How much space does a dental practice need?
Quick math: number of operatories × 400 SF. A single-practitioner general practice typically runs 1,800–2,400 SF; orthodontists 2,000–2,500; endodontists 1,500–1,800. Size for the practice you’ll have in year eight of the lease, not today’s.

When should I start looking for space?
10–12 months before your target move-in for a new location or relocation; 12–18 months for ground-up construction; and 12–18 months before lease expiration for a renewal. Inside 90 days of expiration, most of your leverage is gone.

What’s a Letter of Intent?
A non-binding offer outlining the key deal terms — rent, term, TI allowance, concessions — negotiated before attorneys draft the actual lease or purchase agreement. Its cousin, the RFP, flips the posture: the landlord proposes first. Use LOIs for renewals and purchases; use RFPs when multiple landlords should compete for you.

Do I have to pay my broker’s commission?
No. Landlords and sellers set aside commission funds for every listing, split between both sides’ agents. Tenant representation costs the tenant nothing — going unrepresented just means the listing side keeps the whole fee while you negotiate alone.

Are lease renewals negotiable?
Yes — even pre-negotiated renewal-option terms. The landlord must honor the option terms as a minimum, but the market may support better. Treat every renewal like a full transaction: market analysis, an LOI, and a credible alternative.

What are the three lease start dates?
Lease execution (when both parties sign), lease commencement (when the lease takes effect), and rent commencement (when you start paying — later, if you’ve negotiated free rent). They’re rarely the same day, and each triggers different obligations.

Do I really need a real estate attorney?
Yes, and specifically a real estate attorney. Leases are drafted to favor landlords. A real estate attorney knows the documents, the clause language, and the due diligence timeline — and works alongside your agent to keep the transaction on schedule.

TALK TO US

Whether you’re eyeing your first practice space, staring down a renewal deadline, or ready to buy a building, we offer a free consultation to map your timeline and your options. Send us your situation and your target date — we’ll tell you exactly where to start.