If you have ever considered leasing a piece of commercial real estate, you know that there will likely be some renovations to make it truly fit your needs. Whether you’re searching for retail, office, or industrial spaces, it’s important to prepare for any sort of construction. This can be costly, but some properties have a tenant improvement allowance that can help mitigate the costs associated with a build-out. But, what exactly is this allowance and how can it help you?
Plaza Companies has been one of Arizona’s leading commercial real estate firms for almost 40 years. One reason for this is our extraordinary insight into real estate trends that help to meet your business’s needs. Our real estate expertise is one of the many reasons investors come to us for innovative solutions. Read our article below to learn 5 things you should know about tenant improvement.
You Can Negotiate Your Tenant Improvement Allowance
One thing investors may not know is that the size of the allowance is negotiable. The size of the amount will vary depending on your business as well as other key points of the lease.
If you are going to try and get more out of your allowance, be prepared to provide your potential landlord with financials for their review. These normally include:
- 2-3 years of tax returns
- Balance sheets
- Profit and loss analyses
- And any other information that highlights the numbers that support your business.
What If Your Landlord Doesn’t Offer Tenant Improvement Allowances?
So, you’ve found a property and it’s nearly perfect, but you will need to make some improvements to match your needs. However, you’ve hit a roadblock – the landlord hasn’t offered a tenant improvement allowance. What should you do?
If there is no initial allowance offered, there’s no harm in presenting the idea to your prospective landlord. You deserve to have the best property available to you and negotiating an allowance will give you a better chance of success. You may also have some leverage in your case if you are willing to commit to a longer-term.
Understand Who Pays for Tenant Improvements
The most common practice is that the landlord pays for the improvements and if the cost exceeds one’s allowance, the tenant will pay the difference. Typically it is expressed in a per-square-foot or total dollar sum, but the amount can be decided upon during the lease negotiations.
Say the improvements exceed what your allowance allows and you’re expected to pay the difference. Many landlords are flexible in how you pay for the costs, so you should ask your landlord ahead of meeting your limit to ensure you’re not caught off guard with a high bill. One common way landlords work with their tenants is by including tenant improvement overage costs into the monthly lease cost amount.
Plaza Companies is Phoenix’s Premier Commercial Real Estate Expert
As one of the top Phoenix development services companies, Plaza Companies has partnered with a diverse range of clients. Our team of experts ensures our clients’ highest standards are met. We provide customized services designed to target cost-efficient operations and build a strong ROI. Contact us today to learn more about our development and commercial construction services.