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How to Capitalize on your Tenant Improvement Allowance

How to Capitalize on your Tenant Improvement Allowance

When it comes to commercial lease renewals it can become a tricky game. Do I stay? Is it time to move? Landlords understand that vacancies can go months without a new tenant. In turn, this costs them thousands of dollars over that time. Once they catch wind you are serious about moving they will do everything they can to get you to stay. They do this in a variety of ways but the most common is a Tenant Improvement Allowance. In brief, the tenant improvement allowance is a budget that your landlord gives you to upgrade and modify your current space. This enticement is offered so the landlords can avoid a vacancy. With that said, your decision to stay is worth more to them than the allowance they are offering. Here are some tips to navigate these negotiations and ensure you are getting the best deal possible.

Where is the money coming from?

Landlords are in the commercial real estate business for one reason.. Money! These landlords understand during lease negotiations that allowances are a great incentive to keep tenants where they are. But, being the savvy businessmen and women that they are, they will attempt to pull back intricacies in your lease to help offset costs of their allowance. Be sure to look through every iteration of your offers carefully to ensure that you are aware of what is being given up for your allowance.

Really look at your space

Many tenants fall into a fallacy that newer buildings are in better shape and thus need lower tenant improvement allowances. Be wary, many buildings that look aesthetically fit may be lacking key infrastructure that will be necessary over the life of your occupancy. Everything from HVAC ducts to wiring should be inspected and top of mind when negotiating lease improvement allowances.

All in all landlords want you to stay and are willing to put their money where their mouth is. Make sure you are looking through every offer iteration and truly evaluate the necessary improvements before signing your life away. If you are at this time in your companies life cycle and would like to have a highly experienced and skilled team of Tenant-only advisors on your team please leave us a comment below.

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