Insights: your Tenant Improvement Toolbox

For tenants renting commercial space, whether a law firm, a manufacturer, a small independent store, or any of the variety of businesses that occupy buildings, the broker's influence on the tenant doesn't end with the commission check. The build-out goes well beyond the issuance of the certificate of occupancy and can affect their memory of their broker. From remembering the process of picking out the countertops to staring at perfectly aligned cabinet doors while making coffee in the morning, a positive experience continues in the space for years to come. The same can be said of faulty plumbing, failed wallcovering, or memories of that delay to get in the space when the team had nowhere to go after one lease ended but the other couldn't start. If you represented that tenant, will they call you for help with a renewal or move, or will they find someone else because you offered no tips for a good build-out experience and disappeared when your commission came through?

Many brokers leave a general contractor choice up to a tenant, property manager, or building owner. Some building owners and property managers do have favorite GC's, and some will even limit the choice to a select few. However, consider that in your negotiations for lease benefits and terms, you are holding not only rental rates but also the opportunity to masterfully negotiate options like the tenant improvement allowance and, potentially, the option to let a trusted GC be one of the bidders on the project.

How does this benefit you?

If you get an accurate budget while looking, you know how much TI you need to negotiate for. Additionally, some GC's can work through the ideas for a space that may initially seem too expensive, then create potential solutions within budget, preventing a tenant from having to call their brother-in-law who has done some house repairs or passing on the space altogether.  Similarly, for tenants from out of state, rather than pull a contractor in from somewhere else who will then call random subs, having no knowledge of the quality of those subs' work, a local contractor to refer will help ensure that the GC is using a set of trusted subcontractors to make the process go smoothly.

Will part of your commission be delayed until occupancy? In this case, helping the tenant select a quality contractor can mean you get paid on time versus getting paid one to two months late. Solid and reliable contractors will be better at finishing in a quoted time frame for a variety of reasons. They will likely have relationships with local subcontractors who will prioritize the GC, and they should have few (if any) change orders that will require approval. Additionally, if a contractor offers on-site supervision instead of having their superintendents visiting several ongoing jobs, this can help prevent other issues such as mistakes in ordered finishes or changes in crews of subcontractors mid-job, all of which cause delays to completion.

For all of the things you need to negotiate in the lease terms for your client, remember that the build-out will be something the tenant will look at and remember long after you're gone. If the experience is positive, that could encourage the tenant to be a repeat client of yours and send referrals your way for all that you did to help them have a new business space they enjoy. If the tenant ever needs to sublease, you'll be able to get that done easier, as well, with a quality space that will need few, if any, updates or changes. Let their memory of your help go beyond the lease negotiation by helping them create a space they'll love to be in.