When you own/manage an office building, multi-unit shopping space, or other working property with multiple tenants, there will sometimes be a need for tenant improvement construction.  Units may not be quite right for a tenant, such as needing additional electrical wiring.  Or perhaps they’re growing and want to build out their unit or rearrange the floor plan to be more efficient.

Whatever the reason, an effective tenant improvement construction project can improve the value of your property, while also keeping them as tenants for years to come.

However, these projects can be complicated, with a lot of moving parts to keep track of.   These are some of the most critical to consider, to ensure the project goes smoothly and without going over budget.

Four Key Considerations When Beginning A Tenant Improvement Construction Project

1 – Communication

Communication is always a key consideration in construction projects, but it’s particularly important here.  You, the tenant, and the construction contractors must be entirely on the same page for the entire project.

This should start with extensive discussions between you and the tenant.  You need to know what they want, and they need to understand your concerns, such as how their changes will impact the property as a whole.  Then the contractor should be brought in, to ensure the plan is feasible and there aren’t any confounding factors that will need to be overcome.

The final project should be laid out in detail on paper, with both sides signing off on the plan before it moves ahead.

2 – Set a realistic timeline, and stick to it

Any tenant renovation project will necessarily involve disruption to their work, so they need a firm timeline in place.  This allows them to work around the disruption, or at least make financial plans for handling the downtime.  This timeline should not be altered unless it’s truly unavoidable, due to contingencies. (ie, an unexpected severe storm)

Part of this will involve your choice of a construction contractor.  You want a contractor with a good work history, who can show their ability to complete projects on time and within the budget.  It might be tempting to try to cut corners with a newer or cheaper contractor, but all too often this can lead to bigger problems down the line.

3 – Think long-term

Sure, the tenant needs certain upgrades to help them do business today – but what about the future?  They probably won’t rent that space indefinitely.  What upgrades will increase the space’s overall value, or make it more attractive to future tenants?

This could actually be a good opportunity to get in some renovations that benefit you, as well as the tenant.  After all, if you’ve already got a contractor digging around in the walls, it would be a perfect opportunity to upgrade the plumbing or electrical wiring, for example.  It’ll be much cheaper to do as part of the overall project.

This should be part of the overall planning and negotiations.  Again, everyone needs to be on the same page when it comes to the renovation planning.

4 – How to pay for the upgrades

Generally speaking, tenant improvement construction project costs are usually split between the tenant and the owner.  After all, they’re making upgrades to your property, and you’ll enjoy the benefit of those upgrades once they’re gone.

The most typical method is to establish a Tenant Improvement Allowance (TIA).  This is money you provide specifically for upgrades, set up as a certain amount per square foot.  For example, a tenant with a 2,500 sqft space might receive $20 per square foot, for a total of $50,000.  In this scenario, the tenant will probably hire the contractor themselves, and then be reimbursed for the costs from the TIA.

It’s also possible you could pay directly, in other cases.

Either way, the renovation costs are usually split simply based on who’s ultimately benefiting.  The property owner pays for upgrades to the building itself, while the tenant will pay for any additional furniture, partitions, or other movable objects that they’ll likely take with them whenever they leave.

Of course, there’s a lot of room for negotiation here.  This is a great opportunity to get the tenant to sign on to a longer-term contract, in exchange for upgrade funding.  A five-year contract is typical, as it ensures you’ll get plenty of value for the upgrade funds you provide.

Finding The Right Chicago Tenant Improvement Construction Contractor

Genesis Construction has years of experience building and renovating a wide variety of commercial and industrial spaces.  We focus on listening to our clients and finding solutions to their needs that still fit within their budget.   We want to help you create the best possible environment for your tenants, while still adding to your own long-term value.

Contact us to discuss your renovation or upgrade project!