Tenant Improvement Allowance Negotiations: what you Need to Know
Gym’s offer free trial memberships in order to entice new patrons. Beer companies offer free t-shirts or hats as a way to sweeten the deal when buying a case of their product. We all appreciate a good old fashioned consumer incentive, don’t we? Landlords also offer incentives along the same lines in order to attract prospective tenants to fill vacant office spaces, and navigating these negotiations is a hugely important aspect of lease agreements.
The most coveted landlord incentive is the tenant improvement (TI) allowance - an agreed upon amount the landlord is willing to pay for to renovate or retrofit the space for a tenants specific needs. Typically, TI agreements are inked with per-square-foot parameters, or alternatively, a lump sum amount - but key to understanding this incentive is knowing it’s decided during lease negotiations.
Lease negotiations often include talks about who ultimately gets to decide on a final design, who does the work, and who pays for it all; in this post, we’re looking at what you need to know about tenant improvement allowance negotiations.
Your Goals as a Tenant
Tenants negotiating a new lease agreement for an office space would much rather have the space fitted to their needs, without having to pay out of pocket to make the changes. Tenants negotiating their improvement allowance terms should be prepared to fight for two specific aspects of the deal:
- Get an allowance large enough to cover the improvements you deem necessary to your business.
- Maintain a high degree of control over the build-out process, including who does the work, and the final design.
These goals should determine the scope of your discussions with your prospective landlord, and you should expect to discuss in detail, how you’ll achieve this agreement, which will probably be structured in one of two ways.
Gym’s offer free trial memberships in order to entice new patrons. Beer companies offer free t-shirts or hats as a way to sweeten the deal when buying a case of their product. We all appreciate a good old fashioned consumer incentive, don’t we? Landlords also offer incentives along the same lines in order to attract prospective tenants to fill vacant office spaces, and navigating these negotiations is a hugely important aspect of lease agreements.
The most coveted landlord incentive is the tenant improvement (TI) allowance - an agreed upon amount the landlord is willing to pay for to renovate or retrofit the space for a tenants specific needs. Typically, TI agreements are inked with per-square-foot parameters, or alternatively, a lump sum amount - but key to understanding this incentive is knowing it’s decided during lease negotiations.
Lease negotiations often include talks about who ultimately gets to decide on a final design, who does the work, and who pays for it all; in this post, we’re looking at what you need to know about tenant improvement allowance negotiations.
Your Goals as a Tenant
Tenants negotiating a new lease agreement for an office space would much rather have the space fitted to their needs, without having to pay out of pocket to make the changes. Tenants negotiating their improvement allowance terms should be prepared to fight for two specific aspects of the deal:
- Get an allowance large enough to cover the improvements you deem necessary to your business.
- Maintain a high degree of control over the build-out process, including who does the work, and the final design.
These goals should determine the scope of your discussions with your prospective landlord, and you should expect to discuss in detail, how you’ll achieve this agreement, which will probably be structured in one of two ways.