Before leasing a commercial building to a tenant, a contract is formed. This contract covers the cost of the rent and may also include tenant allowance. Tenant allowance goes hand in hand with tenant improvements, which refers to making changes to a structure or property according to a tenant’s requirements. Some of the changes that fall under this term include relocation of interior walls, flooring additions, shelf installation, toilets, windows and a variety of other additions. Each tenant has specific intentions on how to utilize the building for their business, such as retail or office space, thus the tenant will generally wish to have improvements made to the interior to ensure it is suitable for its intended use. This is where tenant allowance comes in; it is a contracted amount of money that the property owner will pay out for tenant improvements to a commercial site, negotiated between the lessee and the owner.
Ultimately, there are two types of tenant allowance agreements, the first of which is referred to as a Turn Key Build-Out tenant improvement. In this agreement, the landlord pays for the cost of the improvements with the agreed upon rent and lease. The next is called Stated Dollar Amount tenant improvement; in this agreement the tenant allows for a given amount of money to be used for tenant improvements to the property. Generally the Stated Dollar Amount method is preferred by the tenant because it gives him or her, the opportunity to monitor the changes that are being made and attempt to get the most out of the allowance. The type of agreement that is reached between the tenant and the landlord depends highly upon the interest of each. For example, if the landlord does not wish to spend an excessive amount of money on tenant improvements, he or she may prefer to appraise the overall cost. Once the cost is appraised, the allowance can be figured and negotiated with the tenant. There are also a number of other negotiations that may go along with the tenant allowance amount, such as the overall price of rent, the duration of lease and an assortment of other key factors. The ultimate goal is for the tenant and the landlord to come up with an agreement on a set amount of money that suits the tenant’s needs and also satisfies the landlord’s requirements.
All in all, tenant improvements are necessary for a landlord to offer to his or her tenant because it ensures that the tenant is able to use the commercial structure for their desired business needs. Without particular necessities, such as toilets and placement of particular walls, the tenant may find the interior of the building unsuitable for successful business functioning. Therefore, by means of negotiation, a successful contract can be agreed upon to provide necessary improvements.
When it comes to Phoenix commercial construction of offices and business spaces, there are countless examples for why a company may need for the building it leases to have tenant improvements made. For example, a fast food restaurant may need to be converted to a pizzeria or an attorney firm may have to be changed to accommodate a call center. Regardless of the reason for why you need your leased property converted, our pro staff will endlessly work to ensure your place of business is exactly what you desire.