Streamlining the Tenant Improvement Process for Large Property Owners
Nov 14, 2011
Having worked as the landlord's architect for the likes of Equity Office
Properties, The Irvine Company, and Bank of America, we have established an
efficient assembly-line approach for office tenant improvements. Starting with
having a master agreement with pre-established unit pricing, a structured
process must be put in place to allow a landlord account to run like a
Office building landlords have a constant turnover of
tenants, most of which have 5-year leases. When a suite becomes available, we
meet with a prospective tenant with an existing floor plan, tracing paper, and a
black felt-tip pen in hand. We interview the prospective tenant about their
business needs, their "program". As part of the leasing team, our goal is to
entice the tenant to want to lease space in our client's building. In the
initial meeting, if time allows, we sketch some possible floor plans. If the
suite is large, we might sketch the space plan options after the meeting back at
the office. Per our client contract, we typically have about 1 to 2 days to
complete a space plan after the client meeting.
It is our responsibility
to coordinate directly with the prospective tenant to obtain their approval on a
space plan. Therefore, it is most effective to sketch the plan and
simultaneously get the client's approval in the initial meeting. Once a space
plan is approved and the landlord approves proceeding with a preliminary pricing
plan, we typically have about 2 days per the client contract to complete the
preliminary pricing plan. We "field-verify" the existing conditions at the suite
with a standard checklist of items to observe, measure, and document. Back at
the office, we add the necessary notes to the plan. A quality review is
completed and redmarks are quickly corrected, then the preliminary pricing plan
is distributed to a standard distribution list that includes all of the
subcontractors, so there is no lag time in getting the pricing effort underway.
We call the general contractor to schedule a job walk immediately, because the
general contractor, by contract, only has 1 week to provide the cost
The client's in-house leasing directors or consulting brokers
eagerly await the pricing, because they cannot negotiate a lease without knowing
what it will cost to renovate the space per the prospective tenant's
requirements. When they receive the preliminary pricing, they can structure a
deal. The leasing rate and TI allowance they offer a prospective tenant take the
construction cost into account, as well as the architectural and engineering
fees to complete the project. Many leases in the recent market are "turnkey",
meaning the deal includes all of the tenant's desired renovations to the space.
More typical in my experience, however, is a Tenant Improvement allowance. An
average TI allowance is about $25 per square foot for "second generation space."
If the construction and architectural costs exceed the TI allowance, the tenant
must come out of pocket for the balance.
At this point, the project goes
on hold from our perspective for anywhere from one to three months while the
lease is negotiated. We continually check in with the client to see how close
they are to executing a lease in order to predict when the next phase,
construction documentation, will commence. Once a lease is signed, we proceed
with construction documents. The pressure is now on, as the tenantís move-in,
rent commencement, and the brokers' commissions are all pending the completion
of our services. Contractually, we usually have 2-weeks to complete construction
documents, which is swift compared to a full-service tenant improvement project
of the same size which has a 4 to 6 week turnaround time. Fortunately, for most
of our landlord accounts, we utilize templates for each of the client's
buildings. Because we're working with known general contractors that have a good
relationship with the client, our construction drawing templates include only
five drawing sheets, each with standard notes. Working with the same one or two
contractors for all of the client's projects allows the construction
documentation to be minimal. Additionally, having pre-established "building
standards" for each building which outline the product specifications,which we
were previously retained to author, means that products do not need to be
selected, specified, or shown on the drawings.
Once the construction
documents are complete, we distribute them to the standard distribution list of
subcontractors and general contractor, and all other interested parties. The
general contractor again has a week to provide final pricing. Simultaneously, we
submit the drawings to the building department for permit approval. The
contractor gears up to start construction, and everyone await permit approval.
It takes between one and eight weeks to get a permit approved depending on the
Once construction starts, the leasing director fades away,
and the client's in-house construction manager comes to the forefront to oversee
the contractor, manage client changes, and deal with unforeseen problems. A
typical construction time frame is eight weeks. Upon completion, we host a punch
walk and provide a punch list, the list of items the contractor still needs to
complete. The entire process from start to construction completion takes about
six to eight months.
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Written by: Garcia Architects
Starboard TCN is posting this article on its website and blog with the approval of Garcia Architects.
Garcia Architects specializes in commercial interiors & construction management.