The Cost of an Office Build-Out

by CoyDavidson on November 30, 2011

A key component of any lease negotiation is the tenant improvement allowance provided by the landlord to build-out or retrofit an office space for the tenant’s specific use.

One of the first questions every tenant has when considering either new or refurbished office space revolves around how much will build-out or tenant improvements (T.I.) cost? The tenant’s cost exposure is a key factor in the decision making process and important component in determining your projected total occupancy cost.

Projecting build-out costs beyond general ranges is challenging without the benefit of the space planning process, and so many building type options and lease size parameters that affect this estimate. Our friends at Ziegler Cooper Architects provided this Tenant Improvement Cost Guideline Matrix below for reference. For simplicity, the matrix is based on a single floor 20,000 square foot typical tenants, that might locate in one of three building types – Class A, Class B and Class C; and may have finish requirements that range from Building Standard or slightly above, Moderately Above Building Standard or High finish without being extravagant.

This is a guideline only and actual costs will vary based on the condition of the original space, the amount of re-usable assets, the tenant size (say ½ floor versus full floor) and other factors.  It is an average of 3 different General Contractors that specialize in TI work plus historic experience in the market. The consensus opinion from contractors indicates slight increases in cost as we move into 2012.

Tenant Improvement Cost Matrix – November 2011

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  • Lucy Price

    Tenants should also check their area for any rebates, incentives or concessions the local government or utility is offering to build-out energy efficient space.  Efficient T8 lighting, motion sensors, high efficiency split systems for server rooms and the like could qualify for rebates from the local utility and possibly tax advantages, for which tenants should consult their accountant.  For futher information check http://www.dsireusa.com for what is available in jurisdictions accross the U. S.
    The incentive will help pay for the difference in cost,between energy efficient and code, if there is any, plus reduce the building’s electricity cost.  That’s a plus for both sides of the table.

  • Jwalkerinmd

    This is good insight and I like Lucy’s comment below.  I would think that the variance in TI costs would largely be a function of the labor rates for each market across the U.S.

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