Making intelligent choices about your tenant improvements can set up your business for success. Unfortunately, some tenant improvement construction can get expensive. Working with an experienced tenant improvement construction team can help keep costs down. You can also stretch your tenant improvement budget by making informed and creative choices during the construction planning phase.
Almost all commercial properties need tenant improvements as new business tenants begin operating in the building. Cook Builders has completed many Utah commercial tenant improvement projects. We developed this guide to help you position your business for success by using your tenant improvement budget wisely.
How to Make the Most of Your Tenant Improvement Budget
Innovative design and planning choices will help you keep the cost of tenant improvements or leasehold improvements to a minimum. If you lease space for your business, learn these strategies before signing your next lease.
Determine your spending limit.
You won’t know which construction costs to limit until you know your total budget. Often this will be determined by the tenant improvement allowance (TIA) you negotiate with your landlord when you sign your lease. With a TIA, the building owner covers the costs of the tenant improvements, and the tenant repays the owner over time. Sometimes, businesses may contribute additional out-of-pocket funds to the total tenant improvement budget.
When you negotiate with your landlord over the tenant improvement budget, aim for a little more than the total estimated improvement construction costs. That way, you’ll be covered if you encounter any unforeseen expenses during construction. Don’t overextend yourself, either. TIA is essentially a loan. You will eventually be paying your landlord back. If you spend too much on tenant improvements, the expense will cut into your profits.
Prioritize your needs.
Spend most of your tenant improvement budget on the things that matter to your business. Focus on making accommodations for daily business operations. Many tenant improvements won’t be flashy. Often they consist of upgrading, reinforcing, or rerouting electrical, plumbing, and HVAC systems.
You may be tempted to spend your tenant improvement budget on customer-facing projects. If your business operates by generating leads, recruiting, and customer service, those projects may qualify as business operations accommodations. However, if your business is manufacturing and you spend your tenant improvement budget on offices instead of the production floor, your business won’t operate, and therefore you won’t have customers. Cosmetic projects should come second to operations projects.
In some cases, such as franchises, business owners will have mandatory tenant improvement projects to change the building’s color scheme, signage, or other features to match branding requirements. These business owners might not get to decide how their budget is spent fully. The franchises may restrict their authority to only a portion of the budget. These limitations on discretionary funds make prioritizing operations even more critical.
Choose multi-functional features.
Choosing between a functional tenant improvement project and a more cosmetic project can present a challenge. Sometimes you can avoid the choice by using a single renovation feature to accomplish both goals. This is a great way to extend your tenant improvement budget.
For example, suppose you need to add a point-of-sale station near the exit. Suppose you also need an island or barrier to separate a customer seating area from the rest of the operations. What do you do if you only have room in the budget for one feature? If it fits with the layout, you may be able to install the point of sale so that it also functions as the barrier. You complete both objectives without needing additional funds.
Strategic placement of walls, doorways, bathrooms, signs, and other features can often give them secondary functions, allowing them to fulfill multiple tenant improvement objectives in a single project.
Find alternative solutions.
Similarly to finding features that serve multiple functions, you can often keep tenant improvement costs down by finding cheaper options for fulfilling your needs. Sometimes you can use more cost-effective materials. Other times, you may be able to use an existing feature as a substitute for one of the renovations you planned to make.
For example, you could modify an existing enclave to function like an office and avoid the cost of building a whole new space. You could also divide existing large areas, like former conference rooms or cafeterias, into workstations by using dividers instead of building individual offices.
Each existing structure or feature you can use or repurpose is one more renovation you won’t need to pay for. Then, you can put that money into other improvements instead.
Hire an experienced tenant improvement construction team.
You can save money on your tenant improvements at every step of the building process. You can also save time and hassle by working with an all-encompassing construction company like Cook Builders. The in-house architects and engineers can help you make smart design choices to get the most cost-effective solutions. The tenant improvement contractors know how to make the renovations efficiently and quickly. They even have project managers who can help find savings on materials and timelines. When you work with professionals, you get their experience and connections. Those benefits compound the more you trust your tenant renovation project to an experienced build team.
Contact Cook Builders to get started.
When you need a reliable commercial real estate contractor in Utah, look to Cook. Cook Builders can put their experience and expertise to work for you on all kinds of commercial development and construction projects, including tenant improvements.
At Cook Builders, we know how to get the most out of your tenant improvement budget. Our project managers can help you determine your spending limits and which projects to prioritize. Our architects can help you design features with creative functions that stretch your budget. Finally, our build team will quickly and cost-effectively bring those designs to life. All those helpful savings also come with top-notch customer service.