What are leasehold improvements, what is their value, and why do they matter?

Timothy Brown speaks with Dr. Suham Alexander about leasehold improvements, their importance and more importantly, their hidden value.

Highlights

Leasehold improvements include both visible and invisible items such as flooring upgrades, paint, light fixtures to extra outlets, additional wiring for technology including computers and telephones. Traditionally, leasehold improvements were not counted in the value of the practice as landlords typically “owned” these improvements. However, in the 1970’s and 1980’s, ROI Management’s founder, Ray Brown, advocated for the inclusion of leasehold improvements in the appraisal value of a practice and succeeded. In general, leasehold improvements can range from $200-$250 per square foot.

Practice owners and buyers, alike, often discount the cost associated with leasehold improvements, but they are significant as they involve expenses such as permits, various contractors and sub-contractors to name a few. When embarking upon renovations, it is prudent to plan ahead as much as possible for unforeseen circumstances and work with other trusted partners such as designers, dealers, architects, contractors to map out the desired outcome as well as potential problems.