Tenant Improvements: -The Tenant Advisor

Can I make modifications to a space?  If so who pays? – Changes to a building – adding additional office, a power upgrade, sprinkler retrofit, paint and carpet, moving walls, installing racks, distributing power, etc., can generally be accomplished subject to ownership and governmental approval with the proper permitting and code construction.

Changes to the square footage (for example, adding a structural mezzanine), changes to the common area, fencing required parking spaces, creating windows in bearing walls are not so easy.

Changes are typically paid for in one of three ways: the owner pays for all of the cost and concedes the cost (rare); the occupant pays for all of the cost (even rarer); or some combination of the two. This combination could be an owner paying for the refurbishment of the space – paint, carpet, and cleanup – and conceding the cost and paying for the cost of a sprinkler retrofit and amortizing the cost over the term of the lease.

The “acid test” of who pays depends upon the owner’s ability to pay, the owner’s motivation, the general or specific nature of the improvements (think future marketability) and the market (is the competition delivering space to the market completely refurbished). Sometimes an owner will be willing to compensate a tenant in the form of free or half rent to offset the cost of changes.