Who Pays for a Commercial Office Build-Out?

It’s very common for rented commercial spaces to require renovation work before they’re ready for new occupancy. These renovations can be as big and impressive as you like, and the changes can add personality as well as functionality to your workplace. However, we’re sure there’s one specific worry that comes to mind when taking on an office buildout project: cost. Who will pay for the commercial office build-out? Is it your responsibility in full or does the landlord cover some or all the cost? In this article, the team at BE Builds will go over different types of build-out agreements and how they’re typically negotiated between parties.

The Most Common Ways to Pay for a Commercial Office Build-Out

Usually, landlords and tenants will negotiate who pays for office build-out costs during the lease process. This gives both parties a clear idea of what each party is responsible for and ensures both you and the landlord are legally held to this agreement. The most common agreements include:

  1. Standard build-out allowance – This is a pre-packaged set of improvements that the landlord will provide for the tenant. It’s usually standard improvements and changes that are applicable to most businesses, like painting the space out with colors of your choice, different types of flooring, and so forth. The tenant is usually responsible for improvements outside what is specified in the package.
  2. Turnkey office build-out – In class B or class C buildings, landlords often offer turnkey build-out packages that are tailored to what the tenant needs. This is because these buildings tend to be more affordable to lease but do require some upgrading to be fully functional. Tenants benefit from the affordability and the ability to build-out the office the way they want it without having to make a big capital outlay. In these cases, tenants usually only have to pay for costs like office furniture or interior décor.
  3. Rent concession – To make an office build-out more affordable for the landlord and to assist the tenant in getting the space they need, some landlords offer a rent abatement, a discount on rent, or even staying in the space rent free for a set period. Leases can also be extended beyond their expiration date to recapture money spent on office upgrades.

The important thing to remember is that everything is negotiable to a point. Landlords want to rent their space out and businesses want workable spaces, so custom agreements can be negotiated to satisfy both parties.

What Affects Office Build-Out Costs?

You can make your negotiation process easier and more rewarding by understanding the costs involved and knowing which areas are more negotiable than others.

  1. Tenant requirements – A doctor’s office or music studio is going to require more specialized and expensive upgrades than a standard office space for a small logistics company or creative firm.
  2. Condition of the property – An office in a class C building will likely need more extensive and expensive upgrades than a newer or renovated class B or class A building. This can include insulation, HVAC, lighting, tech infrastructure, and much more.
  3. Materials and labor – The quality of the materials you choose and the construction partner you use will have a clear impact on office build-out costs. Getting multiple bids and using an established construction partner with a good supply network can help bring these costs down and get you more upgrades for your budget.

When negotiating, remember that it’s a process where both parties need to win. Use the best aspects of your business, from your good credit and tenant record to your willingness to sign a longer lease to help make your case. You can also offer to manage the build-out and use a team that you source if a landlord doesn’t want the hassle of managing the project themselves. This is especially effective if you need a more specialist space in which you operate.

Build Your Future with Office Construction and Design Specialists in NJ

At BE Builds, we have worked for decades with businesses in New York and New Jersey across all sectors, helping make their dream office spaces a reality.

We know the importance of understanding what your business wants to achieve with their office space, from the work you do and the people you employ to the environmental and sustainability measures you want to support.

Contact us today or visit our website to find out more about our state-of-the-art office design and construction services at: https://bebuilds.com/

Originally posted at: https://bebuilds.com/who-pays-for-a-commercial-office-build-out/

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