lease hold improvements

is there a formula for the amount i can get from a landlord. i am a decent negotiator so obviously i will work for the best number i can get but what should my jumping off point be. a percent of yearly rent? percent of buildout costs? or just a flat rate? sorry if this sound naive but have not done this before. thanks

This is commonly referred to as “Tenant Improvement” or “TI” dollars. It is almost always available in new construction and often available in older buildings. It is almost always negotiable. There are rules of thumb but they are VERY ROUGH. Very often LL’s will quote a year’s rent for tenant improvement. This assumes the LL delivers you an empty cold shell. If the LL is delivering you HVAC, electrical outlets, drywall, etc, it will vary. In Kansas City, $24-30/foot is a very commonly quoted figure for TI dollars.

Aim high. Hope this helps in some way.

I might have been very lucky, but the deal I have with my landlord is that if it is permanent to the build and will remain after I’m gone, then he pays for it, but if it is business specific then I pay for it.

I also must return the facility to it’s former state ( patch holes for roof vent duct etc. ) when I leave.

Usually when my lease period is up, I negotiate improvement before I resign for a new period. On the last negotiation I got improved electricity ( new box and extra plugs) for future upgrades to my restaurant as part of the deal of resigning. Also he pays for paint to the business if I provide the labor.

There is no formula.

It comes down to several factors:

  1. Is there competition for tenants or can the LL count on leasing the space promptly?
  2. Will your improvements add lasting value to the property?
  3. Is the LL anxious to have your type of use in the space for the long term? (20 years+)
  4. How much rent are you paying?

If you are paying a full market rent in a tough market to find and keep good tenants, getting a fair sized TI allowance is probable. If you are lowballing the rent and the LL has waiting list, you are likely to get nothing at all.

Are you getting a rent holiday during construction? There is more than one bucket that draws from the well.

A large TI alllowance with higher rent may be a better way to go than borrowing money to do the building out. If the LL can finance the allowance with the increased rent, you may get a better deal than your bank will give you with the added benefit that it does not show up on your debt load.