Medical office buildings are financed through conventional loans, SBA programs for practices that occupy their own space, and bridge financing for acquisitions or repositioning. Lenders view medical office favorably because of stable, credit-worthy tenants and long leases, but tenant improvement costs and specialized build-outs shape the deal. Owner-occupant practices often do well with SBA financing.
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Medical office buildings are one of the more lender-friendly commercial property types, because the tenants tend to be stable, credit-worthy, and deeply committed to their space. A dentist or a physician group that has spent heavily on build-out is not going to move casually. That stability shapes the financing in your favor.
Medical tenants sign long leases and invest large amounts in specialized improvements, exam rooms, imaging suites, dental operatories, that tie them to the location. That makes their income predictable and their turnover low, which is exactly what a lender wants to see. A medical office building with strong tenants on long leases is often easier to finance than a comparable general office building.
The specialized nature of medical space cuts both ways. It anchors tenants, but tenant improvement costs are high, and a vacant medical suite can be expensive to re-tenant for a different specialty. Lenders will look at the tenant mix, lease terms, the credit behind the leases, the location relative to hospitals and population, and the cost to re-lease if a tenant leaves.
Conventional financing fits a leased, stabilized building with quality tenants. This is often the cleanest path given how favorably lenders view the asset class.
SBA financing fits when your own practice occupies the building. If your group operates from a majority of the space, SBA programs can offer a lower down payment and long-term fixed rates, a strong way for a practice to own its real estate instead of renting.
Bridge financing fits acquisitions, repositioning, or a building in transition, for example one being re-tenanted or upgraded before it qualifies for permanent financing.
If you are buying or refinancing a medical office building, or your practice wants to own its space, send us the details and we will lay out the path that fits.
Alan is Managing Partner at BluRidge Funding and has worked in mortgage and real estate finance since 1996, with commercial lending as a principal focus since 2003. He holds an economics degree from BYU and a law degree from the University of Utah, and is a founding board member and former President of the Utah Association of Mortgage Brokers. More about the team.
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