What to Expect When Planning a Commercial Tenant Finish

Posted on April 23, 2024 by bafcorp20

In the realm of commercial real estate, the canvas of a building is transformed not just by the architects and construction crews who erect the structure but also by the businesses and owners who, in the pursuit of their unique vision, tailor and refine the interior environment. For many business owners and landlords, the process of finalizing the interior of a commercial space, known as tenant finishing or tenant improvement, is a crucial step towards operational readiness and brand expression. It’s more than just aesthetics—it’s about creating a functional, attractive, and, in many cases, a legally compliant space for success.

In this comprehensive guide, we’ll take a deep dive into the world of commercial tenant finish, exploring the process from start to finish, identifying important considerations, and shining a spotlight on design trends and construction technology that are redefining the industry.

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What is a Commercial Tenant Finish?

Before businesses can move in and start operations, the space typically undergoes a series of modifications to meet the specific needs of the tenant. This process, known as tenant finish, encompasses everything from the initial design to the final touch-ups and often involves a close partnership between the tenant, the landlord, and various construction professionals.

Tenant finish out (TFO), also known as tenant improvements (TIs) or leasehold improvements, refers to the custom interior work a tenant does to their rental space to make it fit for business. This may include structural changes, adding or removing walls, electrical or plumbing work, HVAC customization, and finishing surfaces with flooring, painting, and other design elements. TFO is a significant factor in a tenant’s overall business investment, and a well-planned finish out can directly impact their brand, customer experience, and employee morale.

The Tenant Finish Process

A typical tenant finish project can be broken down into several key phases. From the initial conversations to the final walk-through, each step is critical to the success of the project and the satisfaction of the tenant.

1. Planning and Design

Long before construction begins, the tenant and their design team work to conceptualize the space. This involves understanding the tenant’s needs, developing a design that meets those needs, and creating the necessary construction documents.

Establishing a Vision

The early stages of tenant finish are about imagining the space. Business owners work with designers to translate their brand into a three-dimensional experience that will resonate with customers and employees. Lighting, color schemes, and flow are carefully considered to create an environment that’s both functional and inviting.

Design and Documentation

Once the vision is established, it’s translated into technical drawings and specifications. These documents will serve as the roadmap for the construction team, detailing the materials to be used, quality standards, and the scope of work.

2. Budgeting and Permitting

Translating a design into reality involves more than just securing the necessary financial resources. It also means navigating the legal and regulatory landscape to ensure that the finished space is safe and code compliant.

Tenant Finish Allowance

A tenant finish allowance is a set amount of money that a landlord is willing to contribute towards the cost of improvements. Understanding the terms of the TI allowance is crucial for tenants to avoid unexpected costs and for landlords to protect their investment.

The Permit Process

Every commercial project must adhere to local building codes. This requires obtaining the appropriate permits, which can be a complex and time-consuming process. Engaging a construction company with experience in tenant finish projects is essential for a smooth permitting process.

3. Construction and Execution

With permits in hand and the budget approved, the physical work can begin. This stage is all about coordination and communication as multiple trades come together to bring the design to life.

Managing the Build

Effective project management is key to keeping the tenant finish on schedule and within budget. This involves regular site meetings, progress reports, and quick decision-making to address any unforeseen issues that may arise.

Quality Control and Inspections

Throughout construction, quality control measures are implemented to ensure that the finished space will meet the tenant’s needs and the landlord’s expectations. Inspections at various stages of the project help identify and resolve potential problems early.

4. Close-Out and Operation

When construction is complete, the space is turned over to the tenant. However, this doesn’t mark the end of the tenant finish process. There are still several critical steps to be taken to ensure a successful handover.

Final Walk-Through

A comprehensive walk-through of the finished space is conducted to identify any punch list items that require attention. These are typically small, finishing details that need to be rectified before the tenant can occupy the space.

Ongoing Support

Even after the close-out, a good construction company will provide ongoing support to address any warranty work or to assist with the training of maintenance staff on the operation of new systems.

Key Considerations Before Starting a Tenant Finish Project

Engaging in a tenant finish project is a significant undertaking, one that carries with it various considerations that can mean the difference between a smooth, successful process and a costly, stressful one.

The Importance of a Professional Team

Hiring the right professionals, from designers and architects to contractors and project managers, is the first step to ensuring a successful project. Fortunately, you can hire just one full-service commercial construction company that delivers all these services. Experience in commercial tenant finishes is a must, as the unique requirements of these projects demand a specific skill set and understanding of the commercial leasing process.

Understanding Tenant Finish Allowances

Negotiating a fair tenant finish allowance can be instrumental in managing costs. However, it’s essential that tenants have a clear understanding of what is and isn’t covered by the allowance, as well as the approval process for additional funds, if needed.

Complying with Legal and Safety Requirements

Compliance with building codes and regulations is non-negotiable. Tenants and landlords must be aware of their legal obligations and ensure that the work performed meets or exceeds these standards to avoid fines or delays in opening for business.

Recognizing the Role of Timing

Time is money, and this is particularly true for tenant finishes. Delays in the design or construction process can have a significant impact on a business’s launch or relocation timeline, potentially leading to loss of revenue. It’s important to build in contingency plans to manage unforeseen delays.

Design Trends in Commercial Tenant Finish

Like any segment of the design industry, commercial tenant finishes are influenced by trends that reflect broader cultural and societal shifts. Keeping abreast of these trends can help businesses stay competitive and create a lasting impact with their spaces.

Flexibility in Design

With the rise of collaborative workspaces and remote work, there’s a growing demand for flexibility in the layout and use of commercial spaces. Design elements that can be easily reconfigured or repurposed to serve different needs over time are becoming increasingly popular.

Sustainable and Green Building Practices

The growing awareness of environmental issues has pushed sustainability to the forefront of design considerations. Businesses are seeking to reduce their carbon footprint through the use of Eco-friendly materials and energy-efficient building systems.

Technology-Integrated Spaces

The integration of technology in business operations is mirrored in the design of commercial spaces. From smart lighting and HVAC systems to spaces designed for video conferencing and collaboration, technology is shaping the way we use and interact with our work environments.

The Role of Technology in Tenant Finish Projects

Advances in technology are changing the way we approach construction and design. From project management software to sustainable building materials, the tech landscape within the commercial real estate sector is evolving rapidly.

Software Solutions for Enhanced Project Management

Sophisticated project management software solutions offer real-time collaboration, progress tracking, and the ability to anticipate and mitigate potential delays or cost overruns. These tools are becoming essential for keeping large projects on track and within budget.

Sustainable Materials and Construction Techniques

In response to the growing focus on sustainability, the industry is witnessing a shift towards the use of recycled, low-impact materials and more energy-efficient construction techniques. This not only benefits the environment but can also lead to cost savings and improved operational efficiency for tenants.

Virtual Reality and 3D Modeling

Virtual reality and 3D modeling technologies are revolutionizing the design phase of tenant finishes, allowing stakeholders to ‘walk through’ and experience the space before a single physical alteration is made. This not only aids in the visualization of the design but can also help prevent costly design changes later in the process.

Mistakes to Avoid in Tenant Finish Projects

Tenant finishes can be complex, and there are several common pitfalls that businesses should be aware of to ensure the success of their projects.

Underestimating the Importance of Pre-Planning: Rushing into the construction phase without proper planning can lead to design changes, scope creep, and increased costs. Taking the time to plan the project thoroughly in the early stages is crucial.

Not Communicating Expectations Clearly: Clear and open communication between all project stakeholders is vital. Misunderstandings or assumptions about design elements, timelines, or costs can lead to disputes and delays.

Failing to Have a Contingency Plan: Even the most carefully planned projects can be subject to unforeseen circumstances. Having a well-developed contingency plan can help mitigate the impact of these disruptions and keep the project on track.

Conclusion

Commercial tenant finishes require careful planning, a keen eye for design, and a thorough understanding of the construction process. By staying informed and engaging with experienced professionals, business owners and landlords can create spaces that elevate their brands, foster productivity, and provide a standout experience for employees and customers alike.

Feel like moving onto the next step? For additional information on commercial tenant finish projects or to explore how you can transform your commercial space into the perfect environment for your business, contact BAF Corporation at 317-253-0531 today. We look forward to supporting you in your commercial real estate endeavors.

Tips for Negotiating a Tenant Improvement Allowance

Posted on May 24, 2022 by bafcorp20

Negotiating a tenant improvement allowance takes some finesse. It is more than just numbers based on rentable square footage. If you are preparing for a tenant improvement allowance negotiation, there are some behind-the-scenes facts you should explore in order to get a fair and deserving TI allowance for your commercial build-to-suit renovation or business remodel.

Continue reading to learn some important tips for negotiating a tenant improvement allowance, including where to get trusted TI commercial renovation in Central Indiana.

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The Small Details Matter in a TI Agreement

In many cases, it is the smallest details that matter the most in a tenant allowance agreement. Landlords are seasoned when it comes to these kinds of negotiations, so it is important to prepare yourself with the right knowledge; knowledge that protects your right to a fair and honest tenant improvement allowance deal. Look further than just square footage and rent data. Instead, equip yourself with facts about the real economics of the transaction.

Beware of Turnkey Agreements

Most tenants will look at a turnkey tenant improvement agreement as a great deal. But you should not be easily fooled by these offerings. Flat tenant improvement amounts that include a turnkey clause are always in favor of the landlord or property management company. They typically offer these kinds of flat tenant improvement allowances to save themselves money. This is another element of tenant improvement allowance negotiations you need to be aware of: construction control.

Control Over the Construction

Often times, landlords or property management companies aim to claim control over certain elements of the tenant improvement construction. By adding this privilege into their TI agreement, landlords can appointment themselves as construction manager and hire their own builders and contractors. This forces you to relinquish control over the quality of materials used, the competency of the labor, potential labor markups, and more. In the end, tenants are given allowances that do not meet their expectations.

Measure Correctly

Although numbers are the only thing relevant in a tenant improvement allowance negotiation, they are critical to the process, nonetheless. The numbers you want to focus on during the process is the size and square footage of your rentable space. Not only do these numbers have a significant impact on your tenant improvement amount, but also on your rent. Do not fall victim to having your space incorrectly assessed and measured. In some cases, commercial spaces are measured to have more common space than they actually have, which gives a tenant more TI allowance, but causes them to pay more in rent.

Landlord Ulterior Motives

You’ve likely heard the classic economist’s rule, “there ain’t no such thing as a free lunch.” As for negotiating a tenant improvement allowance with a potential or future landlord, keep this old adage in mind. The landlord only cares about their bottom line, so everything they offer in a tenant improvement agreement is likely being balanced out somewhere else in their books. Common landlord tactics for this include higher rent, aggressive rent increase schedule, and stricter lease conditions.

Would you like some help getting the best deal for your tenant improvement allowance in Indiana? Choose BAF Corporation as your one-stop-shop for commercial space planning and tenant improvement construction in Indianapolis, Indiana.

Are All Tenant Improvement Allowances the Same?

Posted on April 5, 2021 by bafcorp20

It is a common misconception that all tenant improvement allowances mean the same thing. If you hear $35 per square foot, that does not mean that your final cost will be exactly that. What you end up spending on your tenant improvement overall is the real number. Continue reading to learn more about TI allowances, including how they can differ in value depending on certain factors.

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TI Allowance May Vary Depending On Your Needs and Preferences

Unless you are granted a flat tenant improvement allowance, which is when the landlord agrees to build out your TI project at no cost to you, there are some additional expenditures you might incur when everything is said and done. Are you planning for a dark shell or vanilla shell turnout? Are you open to reusing and repurposing existing materials? Do you envision an open or closed floor plan? Does your commercial building provide an amenity package for things like restrooms, lockers, food, or common areas? All of these factors can influence the value of your tenant improvement allowance.

Dark Shells Versus Vanilla Shells

When you are remodeling a tenant occupied commercial space, the most basic options you will have to choose from are dark or grey shell turnout, or vanilla shell turnout. A vanilla shell TI package generally delivers your basic, smooth aesthetic. This includes drywalling of all demising walls (partition walls that separate one tenant-occupied space from another, or from a building’s common areas), ceiling, lighting, a number of electrical outlets, essential plumbing, HVAC work, and in some cases, bathrooms. A grey or dark shell TI construction remodel will look a lot different, mostly because they only include the construction of electrician and plumbing stubs, and only on the demising walls of the space.

Reusing Existing Materials to Cut Costs

When you are remodeling a tenant-occupied space, you can almost always expect to incur demolition costs. But in some cases, existing materials that are in good condition can be reused or repurposed in the new space, and still done so up to commercial building codes. Materials like plumbing, metal framing, ductwork, lighting fixtures, and even interior doors can all be reused, and therefore, cut your TI costs.

Building Amenity Packages

Adding restrooms, food courts, kitchens, and break areas to a tenant improvement project is a big expense. If your building comes with an amenity package, such as shared restrooms, cafeterias, break areas, and similar public or communal facilities, you can potential lower your TI build-out expenses, or even allocate the budget towards something else in your TI project.

Are you interested in learning how you can meet all of your business objectives with a successful tenant improvement project? Contact BAF Corporation at 317-253-0531 to learn how we deliver organized and professional tenant improvement remodels in Indianapolis, Indiana.

You Should Also Read:

4 Tip for Planning a Tenant Occupied Building Renovation
Who Pays for the Cost of the Tenant Improvements?
6 Building Features That Corporate Tenants are Looking For

Indianapolis Commercial General Contracting and Design Build Services — Contact Us Today 317-253-0531

Frequently Asked Questions About Commercial Interior Build Outs

Posted on August 27, 2020 by bafcorp20

Business and facility owners experience change as the years progress and the economy evolves. After so much time, many find themselves in need of a brick and mortar, new location, or new look. Either way, in comes the commercial interior build-out. Continue reading to review some of the most frequently asked questions about interior build-outs, including how they can benefit your business’s overall success and where to get started with a trusted bid in Indianapolis.

Indianapolis Commercial Leaseholder Improvement Contractors 317-253-0531

Commercial Interior Build-Out FAQS

What is a Commercial Interior Build-Out?

A commercial interior build-out can mislead business owners since they are often referred to as commercial tenant improvements (TI’s) or leaseholder improvements. Commercial tenant improvements and remodels are generally needed in almost all cases of a business needing new space since most commercial offices and units are not set up to meet the exact needs of a particular company. In fact, this is exactly what a commercial interior build-out is: a commercial construction remodel to an existing space to customize it structurally and culturally to the business’s unique needs.

Do Tenants or Landlords Pay for a Commercial Interior Build Out?

There is always some confusion with who pays for what when it comes to commercial tenant improvements and remodels. Generally, the landlord and tenant can choose how they want to arrange the financial liability for a commercial interior build-out. Among the possible arrangements, examples include:

✒ Rent Concessions – Landlord agrees to reduced rent, or no rent at all, for a select period of time, to cover the total cost of the project.

✒ Built-in Cost – Landlord believes the tenant will be an improvement to their building or facility, and decides to cover the entire cost of the interior build out.

✒ Reimbursement – If the landlord is paying for it all, they will either have the tenants pay and then reimburse them, or divide the cost of the project and include it in the total cost of the lease. This is referred to as a build-to-suit lease agreement.

✒ Square Footage Costs – Landlord agrees to pay to remodel a certain square footage, and the tenant covers the rest of the cost of the project.

Will My Business Benefit from an Interior Build Out?

There are many advantages to doing to a commercial interior build-out, whether you are an existing business that needs a facelift or modern technology applications, or a business just started out and in need of commercial space. A custom interior finish-out not only updates your business, making its operations more efficient and cost-effective, it increases staff morale and productivity. Accordingly, all of these effects increase your business’s revenue overtime.

How Do I Get a Bid for a Commercial Interior Build Out in Indianapolis?

Contact BAF Corporation at 317-253-0531 for superior commercial construction general contracting and construction management in Indianapolis, Indiana. Our skilled and experienced commercial general contractors can help you design and build your interior build out, and offer a simple, streamlined process that meets all business objectives. We serve all corporate, commercial, and industrial industries in Indianapolis, Indiana and its surrounding districts. Call today to request free information or to schedule a consultation.

Who Pays for the Cost of the Tenant Improvements?

Posted on June 12, 2020 by bafcorp20

Tenant remodels and leasehold improvements are much different from conventional commercial construction projects since they are intended to be an investment for a business owner. With that being said, when it comes down to who pays for what in a tenant improvement project, the answer can be more complex than you would expect.

Continue reading to learn more about who pays for the cost of tenant improvement (TI) projects, as well as, where to get trusted TI construction work near you.

Indianapolis Tenant Improvement (TI) Contractors 317-253-0531

TI Cost Planning

Generally, TI costs are considered by the landlord of the property when they agree to a rental rate among tenants. Most often, a portion of a tenant’s monthly rent will reimburse a landlord for the cost of TI construction work, however, this is not always the case. In the case of a turn-key tenant improvement project, it is necessary for the landlord to know specific details on the work being performed, including which areas or spaces are being remodeled. Another reason why a turn-key project requires upfront information for a landlord is so that they know how much the costs are going to be for all the work.

TI Allowances and Lease Signings

At the time of the lease signing, both the tenant and landlord should come to an agreement regarding TI allowances. Tenant improvement allowances are sums of money made available to tenants by the landlord to cover some of the cost of needed remodeling work. Such allowances are usually stated on a per-square-foot basis, and most common for new spaces since more renovations are needed to finish the project. However, the amount of money provided by a landlord for TI work varies greatly, and depends on a wide range of factors, such as the age or current condition of the space, duration and value of a tenant’s lease agreement, market demand, and more.

Furthermore, if the total cost of a tenant improvement project exceeds the original, agreed-up allowance, the tenant is responsible for paying the remainder. Although rare, it is possible for the landlord to take on the excess costs themselves, but they will only do so to a certain capped amount, plus increase the tenant’s rent accordingly.

If a tenant decides to take on the TI work themselves, they risk being subjected to delays and unanticipated setbacks, which can hurt them financially since their rent will still be due on the date in the lease contract, regardless if they can move into the space yet or not. In this case, the tenant takes on all of the risk, and might have to pay more for construction, while also paying rent at the same time, without any revenue coming in.

To avoid this hassle, always hire a professional commercial construction company that specializes in tenant improvement work. You see, commercial building teams use a client-centered partnership approach to accurately understand our client’s business objectives and tenant’s needs, and deliver results that maximize their profitability by driving greater value.

Indianapolis Tenant Improvement Construction Contractors

Contact BAF Corporation at 317-253-0531 for trusted tenant improvement construction in Indianapolis, Indiana and its surrounding locations. Our skilled and experienced commercial general contractors deliver a streamlined construction process that meets all defined engineering and design specifications, procurement, schedules, and budgets for your commercial office space or business. Call today to request free information or to schedule a consultation.