Tenant improvement allowances, funds provided by the landlord to improve office space, are becoming increasingly prevalent during landlord-tenant negotiations, and all companies should consider their role in creating an ideal office space. However, companies seeking to lease at least 5,000 square feet of Class A & B office space with a lease term of at least five years can exercise much greater leverage on the landlord and will typically find it easier to achieve many of the suggestions below. If in doubt, you should consult with a real estate broker to determine the feasibility of any specific item.
1. In today's economic environment, many landlords are providing and funding 100 percent of the building standard installations required by tenants.
2. Tenants should try to negotiate above-standard items, such as millwork, extra HVAC, large glass walls, plush carpeting or special lighting, to get them included in the tenant improvement allowance provided by the landlord.
3. When landlords refuse to fund all or a portion of above-standard items, tenants can try to amortize their cost into the rent over the term of the lease instead of paying out of pocket.
4. Funding above-standard work can also be achieved via negotiating tactics, for example, offering to decrease the quantity of free rent and increase the tenant improvement allowance instead.
5. We recommend tenants hire an architect to represent their interests and suggest a layout and design of the space to ensure tenant improvement allowances are put to the best possible use.
6. Tenants can avoid the need for a large tenant improvement allowance by touring many suites and finding one with a suitable existing configuration. However, we advise tenants to avoid compromising the amount of their tenant improvement allowance just to decrease the rental rate.
7. Landlords are providing generous tenant improvement allowances for new tenants, and tenants can use this as leverage even if they are only renewing, especially if they have occupied the space for the past five-to-ten years.
8. If landlords offer a specific dollar amount for a tenant improvement allowance, we advise tenants to negotiate an open-bid format, based on an expert review by their own architect, project manager or construction firm.
9. Many companies are using tenant improvement allowances to create more light in the workplace by adding glass in offices and conference rooms. From narrow, vertical side-windows to full walls of glass, natural light illuminates interior areas and provides sight-lines for workers to improve communications and productivity.
10. We always recommend tenants hire an architect to brainstorm about the best uses for tenant improvement allowances. Many companies are decreasing hard-walled offices in favor of flexible workstations and huddle rooms, small two-to-four person conference areas, to accommodate departments' changing needs.