Minding Business

3 Things You Need to Know About Buildouts


Building out a space comes with important considerations
Posted: May 29, 2019 by Anna Jotham

Building out a space comes with important considerations

Considering building out a commercial property? It’s an attractive option to many tenants, allowing them to create a space that’s perfect for their business without needing to go all in and break ground on their own building. But there’s a lot to think about when a buildout is on the horizon. To help you work through it, here are three things you need to know about buildouts.

 

1. You’ll need to decided who will take responsibility for the improvements

It’s critical to determine right off the bat who is going to take responsibility for building out the space. If the tenant is taking responsibility, they will take the lead on all improvements. That means they will select their own contractors and materials within the agreed upon budget. That’s right, both parties need to settle on a figure per square foot that the tenant may spend on the improvements. That means the tenant should also be ready to provide a cost projection for the improvements to share during the negotiation phase.

If the landlord/owner is taking responsibility for the improvements, it’s considered a turnkey buildout. For that, the tenant will provide a plan for the design of the space during negotiations. That plan can include everything from electrical work to infrastructure needs, to light fixtures, walls and much more. With a turnkey buildout, the space will be move-in ready for the tenant, and the landlord takes responsibility for the entire project and the associated costs.

 

2. The cost can be greatly affected by many contributing factors

When you’re pricing a buildout, numerous factors will affect the final expenses. Consider the amount of work required for an older building that is in need of improvements versus a new commercial space ready to be finished. Likewise, if the building has features the tenant would like to keep and use, that could drive the cost down. And keep in mind that the type of building also factors into the costs. Regular office space may be cheaper to build out than a more complex setting, like a medical facility. And of course those finishing touches add up; if the tenant needs high-end finishes, that will definitely drive up the final dollar amount.

 

3. Who’s covering the electric bill matters

It may sound trite at first glance, but who’s paying the electric bill and the utilities matters a great deal. In this day and age, as energy efficient options are available and in demand, investing in energy efficient solutions can seem like a no-brainer. Yet a tenant who isn’t paying for utilities on top of the lease isn’t likely to want to pay for energy efficient improvements. More, landlords are less likely to want to pay for energy efficient whole-building improvements if the tenant is paying the utility bills and will see all the savings. Make certain the lease is clear on who is covering what expenses.

 

Being wise about buildouts

As a tenant, having an opportunity to customize a space for your business needs is a great perk. But the buildout process comes with a lot of issues to consider and matters to discuss, and much of that conversation has to happen during the negotiations phase. Be wise about the options available to you and the sometimes sticky questions that are likely pop up, and you’ll ensure a seamless buildout process.

Loading Comments
Real Estate Links Our Domains