Tenant Improvement Allowance
Part One: Tenant Improvement Basics
Tenant Improvement (TI), Tenant Allowance (TA) OR Tenant Improvement Allowance (TIA) are terms that most every small business owner and aspiring business owner should be familiar with, especially if your business requires a brick-and-mortar location.
Why? The Tenant Improvement Allowance may be one of the most powerful resources available to help you get into the space you want or need.
As you begin to look for suitable locations, you will find three basic options:
- Cold dark shell- this is the most basic option where the builder/developer has only provided the exterior shell of the building. The exterior walls are exposed and there is no HVAC, electric, or water.
- White box- the owner has paid to bring in HVAC, electric, and water for you. They have also provided a restroom and installed drywall on the four walls inside your space.
- Second-generation- someone else has already built-out and leased the space. It is now available for a new tenant and will frequently need remodeling and updating.
It is easy to see that the cold dark shell and the white box will require costly Tenant Improvements. Even if you find a suitable second-generation space, chances are good that the existing floor plan and/or other elements will not meet all of your unique needs. Therefore, most of the available locations will require at least some modification so that it will work for your business.
If you had to pay for all of the improvements yourself, it is quite possible that the space you really want may end up being too costly, putting it out of reach.
Many landlords will offer a Tenant Improvement Allowance as an incentive to lease their space and to help offset some of the construction costs. The allowance, like many of the terms of your lease, will be somewhat negotiable and may include a reimbursement of construction expenses, free rent or both.
Understanding that time is money, you will want to quickly determine whether a space can be altered to meet your needs, how much it will cost, and whether or not the landlord will help with those costs.
The two resources you need on your side right away are a knowledgeable Realtor and a trustworthy General Contractor.
If you don’t already know a Commercial Realtor, we can put you in touch with some of the best in the industry.
Contact us early in your journey so that we can help you quickly determine how much your TI should cost and how long the project should take. Equipped with these details, you and your Realtor can make more informed decisions and negotiate the most favorable terms on your favorite location.
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NorthStar Commercial Interiors, LLC
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