Finding the perfect location for your business might not be easy. When you find a location, it might be in a great spot but missing modern design elements. What do you do at this point?
You can ask the property management firm about a tenant improvement to make the location everything you need. It may seem a difficult ask of a commercial property owner. The truth is, building alterations on rental properties is quite common.
Have you found a space to open your business but need modifications? Keep reading to learn more about commercial tenant construction.
What is Commercial Tenant Construction?
Commercial tenant construction is a modification or repair made to a property by a landlord as part of a lease agreement. It’s also known as a commercial leasehold improvement or build-out.
Commercial real estate has traditionally been used for tenant improvement because commercial property changes are needed to meet specific business requirements. The landlord typically pays for these changes directly, reimburses the tenant, or offers reduced rent to the tenant.
Types of Tenant Improvements
Property owners know the commercial real estate business often requires tenant improvements. Business owners need to make sure their building is up to their standards. It doesn’t matter whether it’s for food service, a retail store, a fitness center, or a nightclub.
It’s easy to see a construction project being approved when a big chain opens a new store or restaurant. Tenant improvements don’t just involve making changes to the building. They also include things like:
- constructing or taking out walls
- replacing the HVAC systems
- electrical and plumbing systems
- new flooring
- door and window replacement
- or any other construction project
It’s important to note that requests that don’t improve the property’s value are not considered tenant improvements. These items include furniture, custom decor, and signage.
Four Ways to Pay For Building Alterations
Although tenant improvements are pretty standard, there are many questions regarding how they work. Like any real estate deal, landlords and tenants can reach terms in many different ways. Here are four main types of negotiations that are most commonly used to finance building alterations.
1. Build-out Allowance
A list of upgrades is provided for the tenant to choose from. The tenant pays for any upgrades other than the build-out, and the owner covers the rest.
2. Rent Discount
In exchange for the tenant overseeing the construction project, the building owner modifies the rent. It is either no rent or reduced rent for a fixed term.
3. Tenant Improvement Allowance
The owner funds the improvements up to a set amount. The tenant must oversee the work.
The tenant submits the requested changes to the owner. Upon approval, the owner makes and pays for the modifications.
We Have You Covered
About commercial tenant construction, Complete Conversion Services Incorporated is your renovation specialist. We understand that you can’t rent commercial properties if you aren’t willing to accommodate potential tenants.
We’d love to hear about your rental properties and potential tenant improvement projects. Get in touch to learn about our services.