Tenant Improvement Allowance

How Does A Tenant Improvement Allowance Work?

There are typically two ways a tenant improvement allowance is provided by the building owners when it comes to the fit-out or renovation of an office space:
Turn-Key Build-Out: The landlord covers all costs of the build-out process as part of the agreed-upon rent and space plan that outlines the scope of the construction.
Stated Dollar Amount: This method typically sees the landlord provide a fixed dollar amount for the tenant to use towards the build-out space. For example, if the landlord estimates the cost of the build-out at $45.00 per square foot (and that is the allowance agreed upon in the negotiated rental rate) but the landlord only builds-out the space for $33.00 per square foot, then the tenant has lost $12.00 per square foot that could have gone towards their office improvements.
Another issue with allowing the landlord to control the improvement money is that the tenant relinquishes control of where the money is being spent within their space. It is not uncommon to have surprises show up during the build-out process that do not favor the tenant. This is where Truspace can bring high level of expertise and trust to avoid any potential costly outcomes.
In most cases, negotiating a stated dollar amount is the best way for tenants to maintain control and get the best value from their tenant improvement allowance. The tenant then brings in their own design building team to oversee the design and construction process.