How To Start A Commercial Tenant Improvement Renovation Project

As a commercial space changes hands, the space needs to be customized for the new tenant. This customization is called a tenant improvement, tenant finish, or a leasehold improvement. The space in which you house your business affects the customer impression of your brand as well as your employees' productivity.

Keep reading to discover how to start a commercial tenant improvement renovation project.

Who Pays for the Tenant Improvements?

The tenant should expect to pay for the improvements, but it's possible to negotiate it into the lease agreement. In a commercial lease, you can negotiate which portion of the improvements your landlord pays and which part the tenant pays. This will greatly depend on the demand for the area, the economic standing and projection of the tenant's business, the landlord's desire to fill the space, etc.

The rare but ideal situation is the "turn-key" renovation where the landlord pays for everything and secures all necessary permits. A landlord may offer to pay a percentage of the improvement depending on how much of the space is usable square footage for the tenant.

How Long Is the Commercial Tenant Improvement Renovation Process?

The entire process can take several months depending on your renovation requirements. The process of moving into a commercial unit with a tenant buildout requires an architect to draw the space, a local governing body to approve the plans, and finally, a contractor to build the space. In your lease agreement, you'll want to align the start date of your rental payments with the end of construction or once the substantial completion parameters have been met.

It's not uncommon for the agreement to cover the design and permit costs. Make sure to discuss the budget and allowances for your improvements in detail including when and how the payments will be made.

Here are some common tenant improvement projects:

  • Building glass partitions
  • Install flooring
  • Building walls
  • HVAC
  • Painting
  • Refinishing walls
  • Building usable spaces

Work With a Contractor

The contractor you choose should be insured, licensed, familiar with the area's building codes, and able to provide references. You want to work with a business that has great communication and will provide you with weekly progress reports on the job and any foreseeable setbacks. The legal needs of an office building will be different from a gym or doctor's office environment. The experience of your contractor in these areas can potentially save you time and money in fines.

During and after your project is complete and you obtain a certificate of occupancy, keep all documents for future reference. When negotiating your allowance, gather the information that will show the building owner you are a great investment. Doing so can save you hundreds in your budget that you can dedicate to your business's success. 

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