What TI allowance should a dialysis center expect to negotiate?

Dialysis center build-outs are among the most expensive medical office TI projects, typically running $150–$250 per square foot for a 5,000–8,000 SF center. The RO water system alone costs $80,000–$150,000 installed; dialysis chair stations with plumbing rough-in run $15,000–$25,000 per station; and specialized HVAC for infection control adds $20–$40/SF. Landlords in medical office buildings may offer $50–$100/SF in TI for a creditworthy dialysis operator (DaVita, Fresenius, or regional chain) given the long lease terms (10–15 years) these tenants sign. Stand-alone retail-to-medical conversions may offer $75–$125/SF. Negotiate TI as a rent credit or reimbursement with 60-day disbursement windows tied to construction draws.

How do medical waste and biohazardous material provisions work in a dialysis lease?

Dialysis centers generate regulated medical waste (RMW) including blood-saturated materials, used dialyzers, needles, and biohazardous fluids. The lease must permit: (1) storage of regulated medical waste in a dedicated, locked area within the premises pending pickup; (2) regular medical waste contractor access to the building including to freight elevators and loading docks; (3) installation of sharps disposal containers and biohazardous waste receptacles throughout the premises; and (4) compliance with state Department of Health and federal OSHA medical waste regulations without landlord interference. Many standard commercial leases prohibit storage of hazardous materials entirely—a blanket prohibition that would make a dialysis center operation impossible. Negotiate a specific medical waste carve-out with clearly defined permitted activities and disposal vendor access rights.

What HIPAA-related provisions should be in a dialysis center lease?

While HIPAA obligations run primarily between covered entities and business associates rather than through commercial leases, the physical space requirements for HIPAA compliance must be addressed in the lease. Key provisions include: (1) landlord's right of entry is conditioned on HIPAA-compliant notice and access procedures—no unannounced entry during patient care hours; (2) any landlord contractors working in the space must execute Business Associate Agreements if they may encounter PHI; (3) landlord consent for HIPAA-required security modifications (including door access control systems, privacy glass, sound attenuation, and camera systems) must not be unreasonably withheld; (4) the lease must permit installation of locked records storage and electronic health record server infrastructure. Critically, landlord access for emergency repairs must be structured to minimize exposure to patient care areas.

What happens to a dialysis center lease if the center loses its Medicare/Medicaid certification?

Loss of Medicare or Medicaid certification is an existential event for a dialysis center, as virtually all dialysis revenue comes from these payers. Leases should include a regulatory compliance clause that: (1) requires the tenant to maintain all required state and federal certifications; (2) defines a cure period (typically 90–180 days) if certification is suspended but not yet revoked, during which the tenant must diligently pursue reinstatement; (3) permits the landlord to terminate if certification is permanently revoked and cannot be reinstated within the cure period; but also (4) protects the tenant by providing that if the loss of certification is caused by the landlord's failure to maintain the premises in compliance with applicable building codes and health regulations, the tenant has an abatement remedy and the certification loss does not constitute a tenant default. This is a critical but often-overlooked provision.

Can a dialysis center sublease its space or assign the lease?

Dialysis centers can sublease unused treatment stations (e.g., to home dialysis training programs, infusion therapy, or other medical tenants) or assign the lease in connection with a healthcare system acquisition. However, healthcare subleases involve additional complexity: the subtenant must have its own state operating licenses and Medicare/Medicaid enrollment, and subletting to a competing dialysis operator may trigger anti-kickback statute concerns if there are referral relationships involved. Assignment in connection with a healthcare acquisition (DaVita acquiring an independent clinic, for example) should be a permitted transfer. Ensure the lease explicitly permits affiliate transfers, transfers to acquirers of the dialysis practice, and emergency assignments to any licensed dialysis operator in the event the tenant seeks bankruptcy protection.

Dialysis Center & Medical Infusion Suite Lease Guide 2026: Water, HVAC, HIPAA & TI Requirements

Q: What water supply requirements are needed for a dialysis center lease?

Hemodialysis requires ultra-pure water for the dialysate solution that contacts patients' blood through the dialyzer membrane. A single 20-station dialysis center consumes approximately 1,500–2,000 gallons of water per day. The space must accommodate a reverse osmosis (RO) water purification system with dedicated water supply lines, a DI (deionized) water loop, and drain capacity sufficient for continuous water discharge. The lease must ensure adequate municipal water pressure and flow rate (minimum 30–50 psi and 15+ gpm dedicated to the RO system), dedicated utility metering for water/sewer, and plumbing access rights for installation of under-floor and wall-run supply and drain lines. Many buildings simply cannot accommodate these requirements without significant infrastructure investment.

The Dialysis Center Lease: By the Numbers

$200Average TI Cost Per SF for Dialysis Center Build-Out

2,000Gallons of Purified Water Consumed Per Day (20-Station Center)

12–15Typical Lease Term (Years) for Dialysis Center

$130KAverage RO Water System Installation Cost

The dialysis and medical infusion market is dominated by two national operators (DaVita and Fresenius Medical Care) and a growing number of regional and health-system-affiliated chains. These tenants sign 10–15 year leases with NNN structures, are highly creditworthy (REIT-grade covenants), and have extremely specific buildout requirements that distinguish them from general medical office tenants. Understanding those requirements is essential for both operators and landlords evaluating these deals.

Step 1: Site Selection and Building Suitability Due Diligence

Before a dialysis operator will sign a lease, it must confirm the building can physically accommodate the facility's infrastructure requirements. This is a multi-week due diligence process that should be a lease condition precedent.

Critical Building Assessment Checklist

Water supply capacity: Municipal line size, pressure (minimum 30 psi at point of use), and available flow rate (minimum 15 gpm dedicated to RO system)
Drain capacity: Dialysis generates continuous drain flow from the RO system reject water—typically 2:1 or 3:1 waste-to-product ratios; the building sewer must accommodate
Electrical service: A 20-station center requires 200–400 amps of dedicated 3-phase power for the RO system, dialysis machines, and medical equipment
Floor load capacity: The RO water storage tanks (500–2,000 gallon) can weigh 8,000–16,000 lbs when full; structural floor load rating must accommodate
HVAC infrastructure: Dedicated air handling for infection control (minimum 6 air changes per hour in treatment areas per CDC guidelines)
Ground floor preferred: The weight of water infrastructure and the need for direct drain access make ground-floor locations strongly preferred; upper-floor installations require structural engineering review

⚠ Red Flag: Signing a lease before completing a structural and MEP (mechanical/electrical/plumbing) assessment of the building's ability to accommodate dialysis infrastructure. The assessment should be a named condition precedent to lease effectiveness—with the right to terminate without penalty if the building cannot support the required infrastructure within a cost-feasibility threshold (typically if the building upgrade cost exceeds $X per SF of TI).

Step 2: Water Infrastructure Provisions in the Lease

The water provisions in a dialysis center lease are more detailed than in any other medical office context. The reverse osmosis system that purifies water to medical-grade purity is the heart of the operation; if water pressure drops, if the supply line is contaminated, or if the drain backs up, patient care is interrupted.

Key Water-Related Lease Provisions

Dedicated water line access: Tenant must have the right to install a dedicated water supply line from the building main to the RO equipment room, with no intermediate valves or shut-offs accessible to other tenants or the landlord without 24-hour notice
Sub-metering rights: Dialysis centers consume extraordinary amounts of water relative to other tenants; negotiate sub-metering so actual water/sewer consumption is billed directly rather than pro-rated
Landlord maintenance obligations: The lease should obligate the landlord to maintain building water pressure within specified parameters and to provide advance notice (minimum 72 hours) before any planned shutdowns affecting the tenant's water supply
Emergency water restoration: If a water supply interruption lasting more than 4 hours prevents patient treatment, the landlord must restore service within 24 hours or pay rent abatement for each lost treatment day

Dialysis Water Consumption and Cost Analysis

20-station center, 3 shifts/day, 6 days/week:
Treatments per week: 20 stations × 3 shifts × 6 days = 360 treatments/week
Water per treatment: ~100 gallons (dialysate + reject water)
Weekly water consumption: 360 × 100 = 36,000 gallons
Annual water consumption: 36,000 × 52 = 1,872,000 gallons

At $0.005/gallon (combined water + sewer):
Annual water cost: 1,872,000 × $0.005 = $9,360/yr

If billed pro-rata based on leased SF rather than actual use:
6,000 SF ÷ 50,000 SF building = 12% pro-rata share
Building annual water: $180,000 × 12% = $21,600/yr
Overpayment vs. sub-metered actual: $12,240/yr = $183,600 over 15-year lease

Sub-metering water costs saves a 20-station dialysis center an estimated $12,240/yr or $183,600 over a 15-year lease.

Step 3: HVAC and Infection Control Requirements

Dialysis centers and medical infusion suites require infection-controlled environments that differ significantly from standard medical office HVAC. The CDC and AAMI (Association for the Advancement of Medical Instrumentation) standards require:

Space Type	Min. Air Changes/Hr	Pressure Relationship	HEPA Filtration	Humidity Range
Dialysis Treatment Area	6 ACH minimum	Negative to corridor	Recommended	30%–60% RH
Infusion Suite (Oncology)	12 ACH minimum	Positive pressure	Required (HEPA)	30%–60% RH
Infusion Prep/Pharmacy	30 ACH (ISO 7)	Positive pressure	HEPA required	35%–55% RH
Waiting Room	4 ACH	Neutral	Not required	30%–60% RH
Soiled Utility / Waste Storage	10 ACH	Negative to treatment	Not required	30%–60% RH

Standard building HVAC almost never meets these requirements. The lease must grant the tenant the right to install independent air handling units (AHUs) serving the dialysis areas and to run ductwork, exhaust, and fresh air intakes through the building envelope with landlord approval (not unreasonably withheld) and without assessment of a penalty or upgrade fee beyond actual cost.

Step 4: Medical Waste and Biohazardous Materials Provisions

Most commercial leases contain broad prohibitions on storing hazardous materials on the premises. A dialysis center must have these provisions carved out specifically and replaced with carefully drafted medical waste language.

Required Medical Waste Lease Language

Explicit permission to store regulated medical waste (RMW) within a dedicated, locked, and labeled storage area within the premises pending scheduled pickup
Landlord obligation to ensure medical waste contractor vehicles have access to the building (loading dock or ground floor access) on the tenant's contracted pickup schedule (typically 2–3 times per week)
Prohibition on the landlord interfering with or delaying scheduled medical waste pickups
Permission to install sharps containers, biohazard disposal receptacles, and RMW storage bins as required by state health department regulations
The tenant's medical waste management obligations under applicable state and federal law satisfy the lease's hazardous materials compliance requirements

🛑 Red Flag: A lease with a blanket hazardous materials prohibition that has no medical waste carve-out places the dialysis center in technical default from day one of operations. Blood products, used dialyzers, and biohazardous fluids are classified as regulated medical waste and are present in dialysis centers at every moment of operation. If your lease prohibits this without a specific carve-out, you are operating in violation of your lease terms—a condition the landlord could use to threaten termination.

Step 5: Landlord Access, Privacy, and HIPAA Considerations

HIPAA does not create direct obligations on commercial landlords, but the physical space requirements for HIPAA compliance must be addressed in the lease. The key issue is landlord right-of-entry during active patient care.

HIPAA-Compatible Right-of-Entry Provisions

No unannounced entry during patient care hours (typically 6 AM–10 PM, 6 days/week). Entry during care hours requires minimum 48-hour advance notice and must be accompanied by a member of the tenant's staff
Emergency entry exception: Landlord may enter without notice only for genuine life-safety emergencies (fire, structural failure, active water leak threatening the building). Non-emergency "urgent" maintenance does not qualify
Contractor confidentiality obligations: Any landlord contractor who may be present in patient care areas must execute a HIPAA-compliant confidentiality agreement acceptable to the tenant before entry
Security modifications: Landlord consent for installation of card access systems, privacy glass, and other HIPAA-required physical security modifications may not be unreasonably withheld or delayed beyond 15 business days

Step 6: TI Allowance Negotiations for Dialysis Centers

Build-Out Component	Cost Range (6,000 SF Center)	Landlord TI Coverage?
RO Water Purification System	$80,000–$150,000	Negotiated
Plumbing Rough-In (20 stations)	$120,000–$200,000	Often Covered
Specialized HVAC / AHUs	$80,000–$160,000	Negotiated
Electrical Service Upgrade	$40,000–$80,000	Often Covered
Interior Build-Out (walls, flooring, ceilings)	$120,000–$220,000	Standard TI
ADA & Accessibility Upgrades	$20,000–$40,000	Landlord Obligated
Medical Equipment (not TI)	$300,000–$600,000	Tenant Funded
Total Hard Cost TI (ex. equipment)	$460,000–$850,000 ($77–$142/SF)

TI Allowance NPV Analysis

Landlord offers: $75/SF TI on 6,000 SF = $450,000 TI allowance
Total build-out cost: $700,000
Tenant out-of-pocket TI: $700,000 - $450,000 = $250,000

Alternative: Landlord offers no TI but reduces rent by $4/SF/yr for 15 years
PV of rent reduction (discount rate 6%): $4 × 6,000 × [(1-(1.06^-15))/0.06] = $4 × 6,000 × 9.712
PV of rent savings: $233,088

The $450,000 upfront TI is worth significantly more than the $233,088 PV of the rent reduction.
Recommendation: Take the TI grant, not the rent reduction, unless discount rate > 12%.

Upfront TI grants are almost always more valuable than equivalent rent reductions due to the time value of money. At a 6% discount rate, $450K now beats $4/SF/yr over 15 years by $217K.

Step 7: Regulatory Compliance and License Contingencies

A dialysis center cannot open without state licensure from the Department of Health and Medicare certification from CMS (Centers for Medicare & Medicaid Services). The lease must address:

License contingency: The lease should not commence (and rent should not begin) until the tenant has obtained all required operating licenses and Medicare certification, or until a specified date if licenses are delayed beyond the tenant's control
Certificate of Occupancy condition: The landlord must cooperate in obtaining the CO and any required healthcare facility approvals from state health authorities
Building code compliance: The landlord must warrant that the building meets all applicable building codes as of the lease commencement date, and that any code deficiencies that prevent health department approval are the landlord's responsibility to cure at the landlord's cost
Zoning confirmation: Dialysis and infusion centers are classified as outpatient medical facilities; confirm the zoning permits this use before signing

Dialysis Center Lease Due Diligence Checklist

MEP (mechanical/electrical/plumbing) assessment completed confirming building can support RO system water demand and drain capacity
Electrical service confirmed at 200+ amps 3-phase available for dedicated dialysis circuit
Floor load structural engineering review completed for RO water tank weight (8,000–16,000 lbs)
Hazardous materials clause includes explicit medical waste and biohazardous materials carve-out
Sub-metering provision for water/sewer consumption negotiated (avoid pro-rata overbilling)
Dedicated water supply line access right included in lease
Water pressure and flow rate minimum standards specified with rent abatement remedy for shortfalls
HVAC provisions allow installation of independent AHUs meeting CDC dialysis/infusion air change standards
Landlord right-of-entry restricted during patient care hours with 48-hour advance notice requirement
Medicare/Medicaid license contingency included in lease commencement conditions
Medical waste contractor access to loading dock/ground floor guaranteed by lease
TI allowance structured as direct grant with 60-day disbursement on construction draw requests
Lease permits assignment in connection with healthcare system acquisition without landlord consent
Force majeure clause covers regulatory-mandated closures and CMS audit-related suspensions

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Frequently Asked Questions

What water supply requirements are needed for a dialysis center lease?

A 20-station dialysis center consumes approximately 1,500–2,000 gallons of ultra-pure water per day. The space must accommodate a reverse osmosis system with dedicated water supply lines (minimum 30 psi, 15+ gpm), a DI water loop, and drain capacity for continuous RO reject water discharge. Negotiate dedicated water line access, sub-metering, landlord maintenance of building water pressure, and rent abatement if water interruptions exceed 4 hours and disrupt patient care.

What TI allowance should a dialysis center expect?

Dialysis center build-outs run $150–$250/SF, with the RO water system ($80K–$150K), plumbing rough-in ($120K–$200K), and specialized HVAC ($80K–$160K) as the major cost drivers. Landlords in medical office buildings may offer $50–$100/SF TI for creditworthy national operators on 12–15 year leases. Always take upfront TI grants over equivalent rent reductions—at a 6% discount rate, $450K now beats $4/SF/yr over 15 years by approximately $217K in present value.

How do medical waste provisions work in a dialysis lease?

Standard commercial lease hazardous materials prohibitions must be replaced with explicit medical waste carve-outs. The lease must permit storage of regulated medical waste (RMW) in a dedicated locked area, guarantee medical waste contractor access to the building, and define compliance with state/federal medical waste regulations as satisfying the lease's hazardous materials requirements. Operating without this carve-out puts you in technical default from day one.

What HIPAA provisions should a dialysis lease include?

Key HIPAA-compatible lease provisions include: no unannounced landlord entry during patient care hours (48-hour advance notice required), emergency entry limited to genuine life-safety emergencies, landlord contractor confidentiality obligations for any access to care areas, and unconditional landlord consent to install card access, privacy glass, and HIPAA-required security modifications within 15 business days of request.

What happens if a dialysis center loses its Medicare certification?

Loss of Medicare certification is existential, as virtually all dialysis revenue comes from Medicare. Leases should include a 90–180 day cure period for suspended (not permanently revoked) certification, with rent abatement if the loss was caused by the landlord's failure to maintain the premises in code compliance. If certification is permanently revoked and cannot be reinstated within the cure period, the landlord may terminate. Protect against this by ensuring the lease is clear that landlord-caused code violations that trigger a health survey deficiency are the landlord's obligation to cure.

What zoning classification is required for a dialysis center?

Dialysis and medical infusion centers are classified as outpatient medical facilities or ambulatory healthcare facilities in most zoning codes. This use is typically permitted as-of-right in commercial (C-2, C-3) and mixed-use zones and in designated medical office overlay districts, but may require a conditional use permit (CUP) in neighborhood commercial or retail-only zones. Always confirm zoning permits the specific use—"medical office" and "ambulatory surgical facility" may be treated differently than "dialysis center" under local zoning ordinances.