The State of Tenant Improvement Projects
Over the last few years, tenant improvement projects have been on the rise as hybrid and remote work trends persist and owners face increased competition for office tenants. Landlords, in an effort to attract tenants and secure long lease terms, have started offering allowances, among other concessions, like free rent. Office leasing trends, which have been in decline following the rise of remote work during the COVID-19 pandemic, will likely continue to drive rent incentives up in the near future.
Leasing trends in the post-COVID era show that the majority of office space tenants are looking for space in Class A office buildings, with creative style, smart workspaces, space for socialization, and amenities or services. Class A buildings, which incentivize workers back to the office, have continued to perform well in an asset class in an otherwise struggling office market. The majority of tenant improvement allowances have been for new, desirable office space, where renters are likely to invest in a long-term lease that allows owners to recoup the upfront investment.
Here’s what you need to know about the state of tenant improvement allowances, and what rent concessions mean for your portfolio and the market at large:
The Rise of Tenant Improvement Allowances (TIAs)
Tenant improvement allowances (TIAs), also called fit-out or build-out allowances, are a pre-negotiated amount of money a landlord will provide to a tenant to cover the construction cost. The money is meant to go toward structural improvements such as walling, flooring, HVAC, elevator repairs or replacements, and new plumbing or electrical installments. Funds can also be used for layout adjustments, such as moving inner walls or reworking flooring. TIAs allow businesses to customize their office space, and have a financial safety net for permit filing and space adjustments.
Over the last few years, tenant improvement projects have been on the rise as hybrid and remote work trends persist and owners face increased competition for office tenants. Landlords, in an effort to attract tenants and secure long lease terms, have started offering allowances, among other concessions, like free rent. Office leasing trends, which have been in decline following the rise of remote work during the COVID-19 pandemic, will likely continue to drive rent incentives up in the near future.
Leasing trends in the post-COVID era show that the majority of office space tenants are looking for space in Class A office buildings, with creative style, smart workspaces, space for socialization, and amenities or services. Class A buildings, which incentivize workers back to the office, have continued to perform well in an asset class in an otherwise struggling office market. The majority of tenant improvement allowances have been for new, desirable office space, where renters are likely to invest in a long-term lease that allows owners to recoup the upfront investment.
Here’s what you need to know about the state of tenant improvement allowances, and what rent concessions mean for your portfolio and the market at large:
The Rise of Tenant Improvement Allowances (TIAs)
Tenant improvement allowances (TIAs), also called fit-out or build-out allowances, are a pre-negotiated amount of money a landlord will provide to a tenant to cover the construction cost. The money is meant to go toward structural improvements such as walling, flooring, HVAC, elevator repairs or replacements, and new plumbing or electrical installments. Funds can also be used for layout adjustments, such as moving inner walls or reworking flooring. TIAs allow businesses to customize their office space, and have a financial safety net for permit filing and space adjustments.