Customizing a space you’d like to rent or lease to better suit your needs is called a tenant improvement. To defray the cost of this customization or buildout, a landlord will often offer a tenant improvement allowance. This is a sum of money, sometimes referred to as a TI allowance or a TIA, that’s put towards construction costs. In this blog post, we’ll look at a few of the more common types of tenant improvement projects seen in commercial real estate.

Tenant Improvements in New Spaces

Office space is most commonly delivered in shell condition. This means some common areas are completed but much of the interior is unfinished or bare. This is a smart move on the developer’s end. A means of leaving the space and how it’s portioned off or built out up to the tenant that signs on. The tenant gets an empty canvas to paint however they wish.

This is extremely cost-effective for the developer. There’s no money wasted on improvements that don’t work for the tenant. The tenant can customize the space to suit their specific needs. In a manner that fits their vision. Everything down to the building materials used is of their choosing.

If flexibility is important to you, a grey shell space, often referred to as a cold shell, offers plenty of it. This is part of an unfinished building. The walls are bare. There’s no electrical or plumbing. No ceiling. The flooring is unfinished. There’s not even ductwork or an HVAC system.

A plain vanilla shell or a white box, often referred to as a warm shell, is a building with basic finishing. There’s a ceiling, concrete or finished flooring, electrical and plumbing, an HVAC system, restrooms, and perhaps painted walls.

A plain vanilla/white box or a warm shell is almost complete. This means there’s a shorter move-in time but still room to build out the space however you like. It is also less costly when it comes to tenant improvements since the customizations are mostly for aesthetics or the overall functionality of the space.

Tenant Improvements to Existing Space

If you’re not moving into a new building or development, you’ll most likely be dealing with a space that’s already been built out to suit the needs of a previous occupant. Their customizations likely won’t jibe with your needs or preferences. In this case, a landlord will offer a TIA to build the space however you wish.

Reconfiguring such a space can be expensive. Especially if it involves demolition. Try to find a space where as much as possible can be reused or affordably repurposed. Whatever TIA budget you’re granted can be used up rather quickly if you’re tearing down walls or making any significant per square foot alterations to say the flooring or ceilings.

This is why you ideally want to find a previously occupied space in as much “as in” condition as possible. It can save you thousands.

What to Expect from a TIA

Frequently, a landlord will incentivize you with a TIA to get the space configured to your needs. TIAs are more common in new spaces. This is because it’s an important piece on the developer’s end to finish the building. In many markets, new spaces are also more readily available than previously occupied ones.

The amount of the TIA you receive will vary based on a few things:

  • Customarily, a new space will get a more generous TIA than one already built-out.
  • You’ll get a more generous TIA if you sign into a more landlord-favorable lease. A landlord is more likely to offer a great TIA if you’re agreeing to high rent and longer lease terms.
  • TI allowances are generally better in markets with higher vacancies and less demand.

Always make sure to read the fine print when it comes to TIAs. There may be certain conditions written out. For example, the use of a specific contractor of the landlord’s choosing. Perhaps certain building materials that can and cannot be used. These factors can significantly impact your TIAs bang for the buck.

NEED TENANT IMPROVEMENTS IN LOS ANGELES?

H.W. Holmes, Inc. is a commercial construction company based in Camarillo, CA that provides office tenant improvements and retail/restaurant buildouts in the Los Angeles area. We work with both landlords and tenants. If you’d like a FREE quote on a specific Los Angeles tenant improvement project, let’s talk!