When moving into a new commercial office space, tenant reps typically negotiate for any requested improvements so the space suits a tenant’s needs as much as possible. Completely separate from improvement allowance amounts and any work that will be done, negotiations also involve deciding who will actually be responsible for improvements and seeing them completed. Naturally, there are two trains of thought on this.
Landlords commonly prefer for the tenant to be responsible for their own improvements, alleviating them of the burden of taking care of the improvement project. Likewise, tenants may not be prepared to handle the improvement project themselves for a variety of reasons. Tenant reps can advise either way, depending upon the circumstances. Therefore, any decision about who should handle commercial office space improvements should be not be made until there is an understanding of the benefits of each circumstance.
Should the Landlord Be Responsible?
There are many reasons why tenants and their tenant reps would want to leave responsibility for commercial office space improvements in the hands of the landlord. The landlord likely has more experience handling building improvements than any tenant does. They also typically have good connections with contractors who can provide necessary services at reasonable fees.
Leaving responsibility to the landlord also alleviates tenants of having to actually deal with contractors, getting estimates, and ensuring that work is done on time, with the space finished as scheduled. Tenant reps will usually negotiate for consideration should the space not be finished in time, since this could negatively affect a tenant who has a specific time table to relocate. For the right tenants, landlords may agree to a turnkey arrangement, where they require no out of pocket investment from the tenant to make the improvements necessary to get them into the building. This greatly reduces the risk to the tenant.
Should the Tenant Be Responsible?
Despite the many benefits of putting responsibility for improvements to commercial office space in the hands of the landlord, there are still times when this responsibility is better off with the tenant. It provides tenants with more control over what is actually done and allows them to get the most for their improvement allowance. Tenants and their tenant reps can choose the contractors they prefer and follow the improvements more closely. This may be better when the tenant requires something particularly unique or something that the landlord may not be capable of providing.
Tenants may also want to assume responsibility for their own improvements when the landlord cannot meet their deadline. Along with having more control over everything from timeframe to costs, tenants can also avoid the extraneous fees that some landlords charge to manage an improvements project by controlling it themselves.
Based on these pros and cons, tenants looking to lease commercial office space should consider the various options carefully with their tenant reps. There is no single answer that can fit every leasing situation. It is generally preferable for tenants to leave responsibility for improvements to the landlord; however, when doing so could become too costly or create other problems, it may be worthwhile for tenants to take control of their own improvement project. Improvement costs, any possible savings, improvement timeframe, and other details about the project must be carefully weighed for tenants and their tenant reps to make the right decision!