The renewal of a commercial lease can get tricky. There’s the “Should I Stay?” or “Should I Go?” component. Landlords understandably don’t want vacancies. Going months without a tenant is monthly revenue they don’t want to lose. This means most will do whatever they can to ensure their tenant stays. A tenant improvement allowance is one such way of convincing you to stay. This is a budget the landlord gives to a tenant to use towards upgrades, improvements, and renovations/modifications to the current space. To the landlord, whatever allowance they offer is a worthwhile risk since it means there’s no lapse in rental income. This is why the tenant has to make sure they walk away from the negotiations with the best deal possible. Here are a couple tips to accomplish just that.
Know Where the Money Is Coming From
Landlords are understandably in the commercial real estate game to make money. This means they go into lease negotiations ready to use the tenant improvement allowance as an incentive for a tenant to stick with them. Always remember you’re dealing with the savviest of business people. Always be mindful that most have something in mind to offset the costs of their allowance. Perhaps a local contractor of their choosing they have a business arrangement with. Be sure to carefully comb over every part of your offer. Know exactly what’s being given up, who is is doing the work, and who is paying for what.
Really Look at the Space You’re Leasing
Many tenants think they really don’t need much of a tenant improvement allowance. This is usually when they’re leasing a space in a new construction or a recently renovated building. They’ll assume since the building is in good shape, and the space isn’t rundown looking, it won’t need much work.
So many times a building may seem like a great fit. The space in that building might look great aesthetically; however, the infrastructure needed over the life of your occupancy just isn’t there. Once you’re in the space, you realize the wiring or HVAC ductwork isn’t up to par. This is why you should have a professional thoroughly inspect the space and components of the building prior to sitting down for lease negotiations. Particularly prior to agreeing on a tenant improvement allowance. And be sure to get an estimate from a contractor of choosing, not the landlord’s.
When it comes down to it, most landlords are willing to play ball with you. They’ll put their money where their mouth is to get you to stay in the building. Consider hiring a Tenant-only Advisor or Tenant Representative. Someone who will look over every iteration and truly evaluate the improvements needed. Someone who will act with your best interests on their mind, not your landlord’s.