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Before a tenant moves into a commercial space, there are typically some negotiations between the landlord and tenant that take place. Landlords aim to ensure tenants’ satisfaction and are open to hearing their suggestions for improving the space to better suit their needs. These negotiations are commonly referred to as ‘tenant improvements.’
Tenant improvements are made to elevate the space for current and future tenants. These alterations are customized to configure the area in a way that allows the tenant to efficiently run their business. While the changes requested by the tenant are structural and permanent, they can also benefit the landlord by adding value and appealing to potential future tenants.
However, tenant improvements are not as straightforward as simply requesting installations before moving into the leased space. To shed light on this process and help facilitate successful negotiations that align with the landlord and tenant’s desires, Premier Construction has laid out the basics.
In recent years, it has become popular for landlords to cover tenant improvements through an improvement allowance. The landlord and tenant will agree upon an approved amount, typically expressed as a per-square-foot or total dollar sum. However, if the cost of improvements exceeds the agreed-upon allowance, the tenant will be responsible for paying the difference.
Depending on the state of the space, there are numerous tenant improvement options available. The term “shell finish” describes the condition of the space in relation to the level of customization for tenant improvements.
A cool shell offers the highest level of flexibility for tenant improvements but requires extensive additional work. Some aspects of a cool shell tenant improvements include:
On the other hand, a warm shell has a “basic” finish while still providing tenants with creative possibilities. It includes plumbing and electrical infrastructure, as well as a sprinkler system, restrooms, a ceiling, and an HVAC system. Tenant improvements in a warm shell can include:
The rule of thumb for not approved tenant improvements is to avoid installing fixtures that will not be appealing or useful to the next occupant in the space. Some examples of things that do not count as tenant improvements include:
By avoiding these types of improvements, landlords and tenants can ensure that the space remains versatile and attractive to potential future occupants.
Premier Construction Services can help you repurpose a commercial building for a new tenant. We have helped several businesses in the Des Moines area transform their existing space to better suit the tenant. From minor modifications to a full-on renovation, we can handle it all while sticking to your timeline and budget.
Contact us to get started with a free quote today!