The four biggest mistakes to avoid before opening a med spa in Austin are choosing a location without demographic data, not knowing the local market, signing a lease with weak terms, and going without a commercial real estate agent. We work with medical tenants on their real estate, and these are the mistakes we see most often when owners open or expand a med spa practice.
Why med spas are growing
There is a growing preference for non-invasive and minimally invasive procedures that offer cosmetic benefits without the downtime and risks associated with surgery. Med spas provide the best of both worlds, at a reasonable price.
And with advancing technology, an aging population, and more disposable income, demand for these services is outpacing supply.
So what mistakes should a med spa owner avoid?
1. Not looking at the location data
If you’re not using data and demographics to guide your location decision, you’re behind, because your competitors are.
These are the data metrics we use for our clients:
- Income levels
- Population density
- Age ranges
- Traffic counts
- Competition ratios
This is the first thing to calculate when deciding where to open your practice, before you tour a single location.
How do you access this data?
Most of it comes from paid tools such as Esri ArcGIS, or from GIS software like QGIS paired with census data, and gathering the most up-to-date, useful demographic information can be difficult. The City of Austin publishes free maps through its demographics hub.
Source: City of Austin Housing and Planning Department, from 2020 U.S. Census data.
That’s why partnering with a data company or a commercial agent with relevant data access is the best decision for med spa owners.
2. Not knowing the market
Market knowledge is central to whether your med spa will succeed, and it ties directly into your demographic research. Understand how much demand there is for a med spa in the area you’re considering.
How do you determine demand?
Determining demand means identifying who your customers are and who your competition is. Things to consider:
- Demographics. Med spas typically cater to ages 30 to 65 with higher disposable income.
- Services. What are nearby med spas offering? Are there gaps in service you could fill?
- Competitor volume. How busy are your competitors? Look at Google reviews. Call other med spas to find out how far out they’re booked. If they’re busy, that’s a good sign.
- Competition ratio. Divide the target demographic population by the number of competitors for a high-level look at saturation.
Market knowledge should be researched heavily from both a business and a real estate standpoint.
3. Negotiating an unfavorable lease
Don’t overlook negotiating strong lease terms, and that means more than the monthly rent. Many lease terms should be in your favor or at least fair to both you and the landlord.
Here are some of the lease items we negotiate for our clients:
- Caps on rent increases and NNN expenses. NNN is the tenant’s share of taxes, insurance, and common area maintenance.
- Clear responsibilities. Spell out who covers which maintenance and repair costs, tenant or landlord.
- Free rent and a tenant improvement allowance. The landlord can give the tenant money up front to help pay for interior construction. You need to know what’s market for this.
- Sufficient construction time. You only get a set amount of time for construction before rent starts.
- Exclusivity. An exclusive use clause keeps competitors out of the same building.
If you’re not confident negotiating these items, work with a commercial agent who represents you so you’re protected.
4. Not hiring a commercial agent
By now you can see how vital it is to get the real estate side of your location right. That’s why hiring representation is a smart decision for your business.
A commercial real estate agent will help you:
- Find the best location
- Understand the market
- Negotiate strong lease or purchase terms
The landlord typically compensates the tenant’s agent through a commission built into the transaction, so representation usually costs the tenant nothing.
Get an expert on your side. See our medical office and tenant representation pages, or contact us to see if we’re a fit for your purchase or lease.
FAQ
Frequently asked questions
What location data should a med spa owner look at?
Look at income levels, population density, age ranges, traffic counts, and competition ratios. These should be calculated before you tour a single location.
How do you estimate demand for a med spa in an area?
Identify your customers and your competition. Med spas typically serve ages 30 to 65 with higher disposable income, so check the local demographics, see what services nearby med spas offer, gauge how booked competitors are, and divide the target population by the number of competitors for a simple competition ratio.
What lease terms should a med spa negotiate?
Beyond rent, negotiate caps on rent increases and NNN expenses, clear landlord and tenant maintenance responsibilities, free rent and a tenant improvement allowance, enough construction time before rent starts, and an exclusive so competitors can't lease in the same building.
Who pays the broker when a med spa leases space in Austin?
In most Austin leases the landlord pays the tenant's broker through a commission built into the transaction, so representation typically costs the med spa nothing.
About the author
Tristen Palori is a licensed commercial real estate agent with Foresite Commercial Real Estate and leads Austin Commercial Sites, the firm's Austin team. He has worked Austin office, retail, medical, and industrial deals since 2019. More about Tristen.
