“Build-out”, this is one of the most commonly used phrase or term in the commercial real estate. But, it is not what you assume it is at the first glance. Build-out is not the same as building. Instead of refers rest construction process that takes place on the space that has been built in the raw form.
What does build-out mean in commercial real estate then?
According to commercial real estate Austin, commercial spaces or industrial properties that will be leasing is always a blank canvas. Apart from the walls and doors, there is not much character to space.
That means that this commercial property will ultimately be done as per the tenant’s specifications. This part of the construction process is what we call “build-out” in commercial real estate.
It is obvious that the tenant will likely need more construction on the office space. When we look at the lease agreement, there is a section called “tenant improvements” or TIs. The property landlord often addresses this issue in the lease.
According to TIs, the tenant gets an improvement allowance so that landlord gives tenant money for the cost of build-out. This TI allowance is given as a set amount per square foot.
What are the types of Build-out?
There are two types of build-out. You can negotiate either one with the commercial property management. Every build-out has its own pros and cons.
Tenant Build-out –
This build-out option lets the tenant make every choice. The tenant hires the designer, contractor, architect and works with them to bring life to his vision for the office. Tenant in this scenario is taking a lot of responsibility & also enjoys control over the process and the end result.
Turnkey Build-out –
Suppose your company don’t have time or interest to micromanage construction project, then option of turnkey build-out can be preferred. The landlord can also prefer this option if he wants to maintain control over the contractor that is hired.
They also want to keep a check on when and how the work is done. With a turnkey build-out, you are agreeing with landlord in advance of what work will be done. And they will take care of the construction based on the agreed-upon specifications. So, when you finally have the key in the hand of your office space, it will be moving in ready.
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Who is in charge of the build-out?
A designer, an architect, and a contractor are all involved in the build-out process. But exactly which professionals are needed for the project depends upon how extensive the planned improvements are. As you move forward, you can have a fair idea of what you need in the build-out for your office.
For example, you can have ideas of interior walls, thoughts about type of flooring need & preferred lighting fixtures, etc. But it depends on the experts that you hire for the project who can make it a success.
The tenant can work with an architects and designers to examine the office space. They can discuss the need of their businesses, the number of employees, and the designing preferences. This includes choosing paint colors and also if you want an open-plan office. This way, by working together you can come up with a good plan for the layout and design.
A contractor in charge of overseeing actual build-out will also help guide on technical & building improvements. That the rest of team may not even have considered. You can also avail the commercial property management services from Austin commercial real estate. The contractor will also ensure that the build-out work complies with the commercial property rules and regulations.
Let us now look at the tenant build-out process –
Before getting on to the build-out stage, the company needs to find the best possible commercial real estate for rent. To know more on how you can find commercial real estate properties off-market, click here. The factors that you need to take into account are the location and the overall size of that office space.
While you can have a fortune in finding the perfect office space. The reality is that – even best spaces typically need some changes in build-out for suitable to your business needs & requirements.
This is the point when you have found a promising office space. And you want to talk to the commercial property management about the build-out terms. Along with other important matters like leasing terms and the rental rates. The build-out also can be negotiated with the landlord.
You can work with them and come to an agreement that includes tenant improvement allowances. That cover all or most of the construction & design that are necessary to get the space fitted to your standards.
You cannot just “wing it” through the entire process. You need to let in the specialists like designers and contractors to step up the game. They are best to provide you with quotes and a fair idea of how much a build-out can cost you.
Once you have a fair idea of how much the build-out will cost you. You can negotiate with the landlord then. If they are not willing to provide funds to cover what you are anticipating. You can decide if it will be worth paying the extra yourselves or not.
You must keep in mind though that this is the cost that you will never get back. If, for some reason you end up relocating your business to a new space in a couple of years. You will have “lost” the money that you ad put into the build-out.
You can check with the landlord if he is willing to lower the rental rate. And offer a shorter lease term to sweeten the deal. But if you are unhappy with the tenant improvement allowance or the build-out terms offered to you. Then you may consider moving into another office space. And hope that the negotiation goes better with the next landlord that you speak to. Or you can decide on whether you should or shouldn’t rent-to-own.
The bottom line –
It is completely okay to turn to turnkey options.
Now that you know the meaning of build-out in commercial real estate. You can be prepared to confront this important aspect of the lease negotiation. If you feel intimidated by the thought of dealing with the building construction.
Then GW Partners, will help you through the negotiations and also tenant representations. They will also help you get a good turnkey arrangement. That will enable you to secure the type of office you will need. Without having to hire the designers and contractors on your own.
It all comes down to how much control and responsibility you want on you to renovate your office space. If negotiated properly, turnkey build-out will just be as satisfying with a lot less responsibility and work on your part.