Maximizing Your Space: How to Make Physical Therapy Clinic Real Estate Work for Your Bottom Line

GreenOak Accounting
7 days ago
5 min read

For most physical therapy practice owners, space is one of the biggest investments you’ll ever make. Your lease isn’t just an address; it’s a key driver of your business’s potential for profit—or for pressure. At GreenOak Accounting, we see practices succeed when they treat space decisions with the same strategy and discipline they bring to patient care.

Let’s break down how to maximize your clinic space, the most important rules of thumb, and how to run the numbers before you sign on the dotted line.

The Rule of Thumb: 10% of Square Footage in Visits Per Week

Here’s a simple but powerful metric:

Aim for close to 10% of your square footage in visits per week.

Example: If you have 2,500 square feet, your goal should be around 250 visits per week.

If you’re well below that, you may be underutilizing your space or paying for more than you need. If you’re regularly exceeding it, it may be time to expand (or raise your rates!).

How Much Can You Afford to Pay for Space?

This is the question that can make or break your bottom line. Here’s how to run the numbers:

1. Figure Out Maximum Capacity

Clinic size: 2,500 sq ft
Target visits/week: 250 (10% of square footage)
Average revenue per visit: $92
Potential weekly revenue at 100% capacity: 250 x $92 = $23,000
Monthly revenue (assuming 4.33 weeks per month): $23,000 x 4.33 = $99,590

2. Plan for Realistic Utilization

You may not hit 100% right away. A great target for a mature clinic is 85% of that goal.

85% of 250 visits/week: 213 visits/week
Weekly revenue at 85% capacity: 213 x $92 = $19,596
Monthly revenue: $19,596 x 4.33 = $84,825

3. What’s the Right Rent Range?

Here’s the key: We aim for rent (including CAM and utilities) to be no more than 5–8% of your gross income at 85% capacity. It’s absolutely OK if your rent is less than 5%—that just gives you more breathing room for profit! But if your rent is higher than 8%, that’s when profit margins start to shrink and the risk of cash flow problems increases.

5% of $84,825: $4,241/month
8% of $84,825: $6,786/month

If your rent is higher than this, your space is probably too expensive for your projected volume—and may limit your ability to be profitable.

Real-World examples

Example 1: Space That Makes Financial Sense

Clinic size: 2,500 sq ft
Rent + CAM + utilities: $5,500/month
Monthly income at 85% utilization: $84,825
Rent as a % of income: $5,500 ÷ $84,825 = 6.5%

Bottom line: This is right in the healthy range. The space fits your business goals and is affordable based on expected visit volume. If your rent is even lower, that’s even better for your bottom line!

Example 2: Space That Doesn’t Make Financial Sense

Clinic size: 2,500 sq ft (same as above)
Rent + CAM + utilities: $9,000/month (premium area or high lease)
Monthly income at 85% utilization: $84,825
Rent as a % of income: $9,000 ÷ $84,825 = 10.6%

Bottom line: Even with the same space and number of visits, this rent is well above the recommended range. Unless you can quickly increase your visit volume or rates, this lease could put serious pressure on your bottom line and make growth much harder.

Don’t Forget Improvement and Buildout Costs

The cost to improve or “build out” your space can be significant—often $50,000 to $100,000 or more. Here’s what to consider:

Who will pay for improvements? For longer leases (and in softer markets), some landlords will cover part or all of your buildout cost. Sometimes, though, the landlord can’t or won’t, and you’ll be responsible.
Sometimes landlords will pay—and add it to your lease as an additional monthly fee. Always ask for terms in writing.
Negotiate free rent: It’s common to receive free months (often about 0.5 months per year on your lease—e.g., 5 months for a 10-year lease). Always ask for this. It can help you start generating revenue in your new space before rent payments begin.
Aim to start generating revenue before rent kicks in. Time your buildout and opening so you’re not paying rent during months with no patient visits.

Pro tip: Buildouts almost always end up more expensive than expected. Have a detailed financial plan (with a cushion!) before you sign the lease.

key Takeaways

Use the 10% rule: target weekly visits should be about 10% of your square footage
Rent (including CAM and utilities) should be no more than 5–8% of your gross income at 85% utilization. If your rent is lower, that’s fantastic—enjoy the extra margin! If it’s higher, watch your profits closely and be prepared to make adjustments.
Don’t overcommit to space you can’t fill—or to improvements you can’t comfortably pay for
Negotiate for free rent, improvement allowances, and always read the fine print on buildout costs
Plan your cash flow to cover the ramp-up period (and a little extra, just in case)

Why You Need More Than Compliance—You Need a Financial Partner

Having strong financials is about so much more than just compliance or filing taxes. At GreenOak Accounting, we help practice owners run the numbers for big, strategic decisions—like new leases, expansions, and renovations—every single day.

We know the industry benchmarks. We’ve seen what works (and what creates financial headaches). And we partner with you to build a clear, confident financial plan that lets you grow on purpose—not just hope for the best. The right financial partner helps you see risks, plan for the unexpected, and find the smartest path to profitability.

Whether you’re evaluating a new space, renegotiating a lease, or planning your next big step, having a financial expert in your corner can save you from expensive mistakes—and help you make the most of every opportunity.

Ready to run the numbers on your next space—or check if your current lease still makes sense?

GreenOak Accounting can help you evaluate your options, crunch the numbers, and avoid expensive real estate mistakes—so you can focus on helping your patients heal and your practice thrive.

This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney, or advisor regarding your particular facts and circumstances.

GreenOak Accounting specializes in working with private practice owners across the United States. For more information on our services, visit our website.