When negotiating a commercial office lease, one of the many concerns that must be carefully handled is tenant improvements. Agreeing on improvements, and ensuring they are completed, can turn even the most friendly negotiation into a strained one. This is one of the most important reasons why a business should work with experienced tenant representatives when leasing commercial office space. Tenant reps can help a company avoid the pitfalls that often come with commercial leasing, so they get the best space for their money.
Never Accept the Terms “As Is”
When negotiating for tenant improvements (TI’s), tenants and their tenant representatives should not accept any terms stating “as is condition” in the agreement. Doing so alleviates a landlord of any unknown or hidden conditions that may not be obvious when the agreement is signed, but could arise while improvements are being made. Skilled tenant reps understand that “unknown conditions” must be specifically spelled out in the lease agreement, in terms of who will be responsible.
What Is A Cash Allowance?
A company leasing commercial space must understand that the term “cash allowance,” although normal terminology, does not actually involve any kind of cash. Instead, it means the amount of money, or allowance, a landlord agrees to give to a tenant for improvements. This amount is normally given as a reimbursement that is paid once a month to the tenant when they present receipts for improvement expenditures.
Understand Tenant Improvement Terminology
There are other terms relating to tenant improvements that must be understood as well, in order to avoid any confusion that can cost tenants money in the long run. Since landlords try to spend, and do as little as possible to get a new tenant into a leased commercial office space, understanding the various types of commercial office space, such as the following, and what to expect is important:
Pre-Built Space – This is newly constructed, non-finished office space that has not been previously occupied. It is the basic office interior setup, with basic paint and flooring/carpeting. Pre-built space should not be confused with move-in condition space.
Move-In Condition Space – This is commercial office space that is ready for a tenant to move into. It has phone/internet cabling and furnishings, but is usually finished at the tenant’s expense.
Build-to-Suit Space – This is also known as “turnkey” office space or “new building installation.” Build-to-suit means the landlord initially builds the new office space according to the specifications of the incoming tenant. When a tenant rents build-to-suit office space, it alleviates the need to make major changes to a space that was built for a different tenant.
Obtaining the most optimal agreement on a commercial office lease – one that benefits the tenant, giving them the improvements that they need – requires skilled negotiation by experienced tenant reps. It also requires a good understanding of terminology that can be misleading, and cost tenants money if misunderstand. Tenant representatives, who protect a tenant’s interests, and ensure negotiations for tenant improvements go smoothly, are a valuable asset that every company should consider!
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