What to Check Before You Buy a Medical Property

Most buyers approaching healthcare property for the first time underestimate how different it is from standard commercial real estate. The asset class rewards preparation and penalises assumptions. In my experience working across Brisbane, the Gold Coast and regional Queensland, the buyers who get this right share one thing in common. They do structured due diligence before they fall in love with the yield. The ones who get it wrong usually skip at least one of the six areas that actually matter.

Start with the lease. Not a summary of it, but the actual document. Healthcare leases vary enormously in how they handle rent review mechanisms, make-good obligations, permitted use clauses and assignment rights. A permitted use clause that reads narrowly, say, 'general practice only', can destroy a tenancy the moment the operator changes their service mix. Rent reviews tied to CPI are not the same as market reviews, and the distinction matters when you are projecting returns over a five or seven-year term. The lease is the asset. If it is poorly drafted or heavily weighted in the tenant's favour, the building is almost secondary.

Next, understand who is actually sitting in the building. Tenant covenant strength in healthcare property is not just about whether a practice is currently busy. It is about whether the operator has the financial resilience and clinical registration standing to honour the lease across its full term. A single-GP practice operating without a succession plan, in a suburb where recruiting a replacement practitioner is genuinely difficult, carries a different risk profile than a specialist group with multiple clinicians, accreditation under RACGP practice standards and a multi-year trading history. Ask for evidence of registration with AHPRA, and do not skip the financial health check.

Building compliance is the third check, and it catches more buyers off guard than any other. Healthcare premises carry regulatory obligations that standard commercial buildings do not. Disabled access under the Disability Discrimination Act, ventilation requirements for clinical spaces, plumbing configurations for hand basins in treatment rooms, fire separation between tenancies in multi-occupancy buildings, all of these cost real money to rectify if they are not already right. Get an independent building compliance report, not the vendor's assurances. Zoning confirmation sits alongside this. Confirm with the relevant local council that the current use is lawfully established, not just tolerated, and check whether any proposed rezoning in the area could affect the property's use rights or future value.

Fit-out condition deserves its own assessment. A medical fit-out that looks new can conceal significant issues, including non-compliant wiring for medical equipment, inadequate data and communications infrastructure, or a floor plan that functions well for the current tenant but would require full demolition to suit anyone else. Ask when the fit-out was installed, who owns it under the lease, and what the make-good obligation requires at end of term. In some leases the landlord inherits a high-quality fit-out at no cost; in others they inherit a strip-out liability. The difference is not trivial. Understanding the true economic condition of the space, separate from its physical appearance, is something our article on sessional rooms versus dedicated suites touches on in terms of how configuration drives cost outcomes.

Finally, comparable transactions. No acquisition in the healthcare property sector should proceed without a clear read of what similar assets have actually sold for, not what vendors are asking. Comparable sales analysis in medical property requires adjustments for lease length, tenant type, building age, compliance condition and location relative to hospital catchments or population growth corridors. ABS population data is genuinely useful here. A medical building in a suburb where the working-age population is growing at double the national average has a different demand profile than one in a static or declining catchment. The population story matters because healthcare demand is non-discretionary, as we explored in why medical property holds up when other assets don't. But non-discretionary demand does not automatically justify any price. The comparable evidence anchors the conversation in reality, and reality is where good acquisitions are made.

This article is general information only and does not take your personal circumstances into account. It is not financial, legal or professional advice. Seek advice specific to your situation before acting. Content is AI-generated from publicly available industry sources and may contain errors.