Current Build out Improvements Commercial Tenants are asking from Landlords to sign a new lease
What are the current build out improvements that new tenants are asking (and getting) when renting out commercial retail space? What are common multiples of rent landlords are paying? I just had a national tenant ask for what totaled 3 years rent for me to spend in upfront remodeling for a 10 year lease. I turned them down.
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This is a standard practice in the commercial retail, most name brand stores have this in there contract! To remodel every 7-10 years to keep the stores in there best condition. Usually it is split between the tenant and landlord. It also helps the economy by paying trades to do the remodels. It has made me a decent living for 30 years! It's a win- win for everybody!
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When I moved office spaces (within the same complex) we had a few specifications that needed to be met, but since the move was mutually beneficial (they need our space for a build-out for another client and we were soon to be out growing our space) we agreed to go up a bit on rent but had THEM retro-fit the space to what WE wanted. We (have since) extended our lease again and have been at the same complex for almost 18 years!
As Architects, we have specialized in Interior Architecture, Renovations, Installations and Improvements, and selection and acquisition of Furnishings, Kitchen & Bathroom components, etc,
10 year lease? Will they help to pay for the improvements at all? Can i charge a premium? How is their credit? Will the bank help?
As landlord and having worked with so many over 30 years, I can say many different scenarios drive the agreement between tenants and landlords. But typically speaking the build out if specifically geared towards your business model is an expense the you the tenant pays for. However in rare cases the landlord will negotiate to pay for a portion of the base work with longer lease agreements. No landlord likes empty space, nor do they want to be occupied by others at a loss to them.
Bottom line is your both there to make money. If it works for both of you and is reasonable, both parties can reap the benefits of that. relationship.
Typically split cost to build out or remodel space. 7-10 year lease is normal for leased space with construction. Remember, the improvements are yours after the tenant leaves. I've offered $20 -$40/sf TIA once I see their plans and the value it may bring. I'm also careful to get an approval system in place in the event I don't do the work. I also ask for lien releases before I reimburse the tenant any money. It's a safe practice, and be sure it is written into your lease contracts.
Build to suit, doesn't mean bankrupt the owners and demand unreasonable terms. Tell them to go somewhere else. Or, say the monthly is at $700. They want the moon and stars, new contract, new terms, new monthly of $1500.
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As building owner we recommend to be advised about any upgrade or repair by unlicensed people because Insurance will do not cover work performed by unlicensed people