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Tenant Improvement Construction Explained

Tenant Improvement Construction Explained

Tenant improvements, also known as leasehold improvements, are physical changes made to leased commercial property to appeal to and acquire a desired tenant, or to meet an existing tenant’s requirements. Typically, tenant improvements are outlined and discussed in lease agreement negotiations between the landlord and tenant. Otherwise, tenant improvements are made to make a property more attractive and appealing to a desired tenant.

Commercial property owners or property management are responsible for meeting building codes, ADA compliant upgrades, and seismic retrofitting. Basically, the property has to operational and up to date for a tenant to occupy and do business within the property.

Tenant improvements can be simple repairs to complete commercial remodels. With the underlying goal of tailoring a commercial property to meet a tenants needs.

Commercial properties generally are not tailored to a specific business. As a result, tenant improvements are required to make a property more suitable for a tenant to occupy. It makes a tenant happier and more successful in running a business which will ultimately benefit the landlord.

Tenant Improvement And The Lease Agreement

In lease agreements, the property owner or management team negotiate require tenant improvements with the prospected tenant. In this negotiation, the landlord and tenant determine what changes are allowed to the property, as well as the landlords allowance, or funds allocated to make those changes.

Furthermore, tenants can actually make changes to their property out of their own pocket as long as it has been agreed to. Landlords may choose to reimburse the tenant.

tenant improvement lease agreement

Incentives For Tenant Improvements

There are many incentives for both property management (landlords) and tenants to work together to establish tenant improvements.

Property Management

Property management or landlords make their money by leasing out their property. However, no one wants to lease a property that is not suitable for their business. Therefore, to be successfully at obtaining and appealing to tenants’ landlords must be reasonable and accommodating to their tenants.

If successful, property management can enjoy the benefits that come with tenant improvements:

  • Increased property value
  • Higher leasing rates
  • Improved tenant retention
  • More attractive property
  • Happier tenants

Tenants

A business is primary goal is to maximize their profits, therefore when they select a commercial property to lease, they want something practical that will provide them the most value. As a result, when they lease out a property, they want to be able to make their necessary tenant improvements to improve the efficiency and profitable of their business.

If successful, tenants can benefit from:

  • More customers
  • Higher profit margins
  • Improved worker morale and productivity
  • Higher customer satisfaction
  • Improved logistics
  • Increased storage space
  • Improved branding

What Are Common Tenant Improvements Construction Projects?

construction workers

Tenant improvements can vary in size and complexity based off what has been agreed to in the lease agreement. An often require the assistance of commercial contractors to make necessary changes to the property. Commercial contractors are specialized in servicing commercial businesses in a variety of construction projects such as:

  • Commercial Remodeling
  • Renovations
  • Painting
  • ADA Compliance
  • Seismic Retrofitting
  • General Repairs and Maintenance

Commercial Remodeling

Commercial remodeling is quite common among tenant improvements. Usually, it can be a complete change of the commercial property to meet a tenants needs, or it can be just changes to the interior or exterior of the building. Nevertheless, the size and complexity of commercial remodels often bigger than most projects, which warrants a larger investment by both tenants and landlords.

For example, a tenant could want an empty commercial space to be tailored to fit the needs of a restaurant, which will require the installation of a kitchen, commercial freezer and fridge, equipment infrastructure, booths, lighting, and more.

JMF Commercial Construction Remodeling and Renovation Services

With commercial remodels you can expect to work with a commercial contractor. A commercial contractor will partner with a variety of subcontractors to tackle on specific trades such as the required plumbing and electrical work that will be done.

Renovations

Renovations are upgrades or improvements made to an existing structure or building. These projects tend to be a cheaper alternative to remodels.

For example, a tenant could request the replacement of all lighting in a building to be more sustainable and cost effective.

Renovations are popular projects among tenant improvements, to help brand a commercial space to then tenant’s business.

Painting

Many tenants want to change the look of their commercial property fit their brand. As a result, many look to paint the interior and/or exterior of their leased space. Painting goes a long way in expressing a brands image to customers and employees.

Commercial Office Renovation services
Interior & Exterior Painting Services

ADA Compliance

Americans with disabilities act (ADA) plays a large role in tenant improvements. ADA requires all businesses to meet specific building requirements, to make their property accessible to all individuals regardless of limitations.

Common ADA complaint upgrades include the installation of railing, ramps, handicap parking stalls, lifts, and elevators. Often, most of these changes can be found in the common areas of a commercial property, restrooms, parking lots, entrances, and walkways.

Property managers/landlords need to make these changes to avoid fines and penalties.

ADA Compliance construction Blog

Seismic Retrofitting

Many tenant improvements often require the attention of seismic retrofitting. Earthquake retrofitting is required in the state of California. It mandates that all buildings and structures meet specified standards. These standards are designed to make buildings withstand earthquake activity to limit damages.

Depending on your building type and location may dictate what type of standards your building needs to meet. Ultimately, seismic retrofitting will include the reinforcing of all walls and ceilings.

JMF Commercial Construction Seismic Retrofitting Services

General Repairs and Maintenance

Often, a commercial space is not always up to a tenant’s standards, which may call for an allowance for general repairs and maintenance of the property. General maintenance can be anything such as termite and dry rot repairs, masonry and concrete, lighting, and others.

General repairs and maintenance are important in preserving a safe and inviting environment for tenants to run a prosperous business in their leased commercial space.

Tenant Improvement Construction Process

If you are looking for tenant improvements for your commercial space, then take a look at the construction process:

  1. Lease Negotiation
  2. Design, planning, and construction
  3. Tenant Walkthrough
  4. Certificate Of Occupancy

1) Lease Negotiation

As mentioned earlier, tenant improvements begin with lease negotiations. Prior to leasing the property, you should inspect the commercial property for required changes, building violations, and property damage. Ultimately, you want to determine whether the property will be suitable for business.

Once accomplished, the next step is to present the concerns to the landlord or property management team to begin negotiations. Responsibility for tenant improvements must be determined. In the negotiation, the tenant and landlord will determine who pays for what and how much. Typically, a landlord will allocate a fixed amount or percentage, while the tenant will have to pay for the remaining balance.

To help this process become more thorough and each party knows what they are paying for, then an itemized list of the construction project should be outlined. This may require the tenant to reach out to multiple contractors to obtain a bid for estimated costs.

It is imperative that the tenant is certain on what they want as change orders later on can amount to a much more expensive project.

Additionally, a timeline should be established by the landlord and tenant. If a tenant is going to be reimbursed for tenant improvements, then payments terms must be negotiated by installments or lump sum.

Tenant improvement Lease negotiation

2) Design, Planning, and Construction

The first step in this process is design. Designing is usually the result of hiring an architect to design the tenant’s improvements. If the project is less complex or smaller, then no architect may need, or you can hire an interior designer.

Once the project is designed you can begin your search for hiring the right contractor for your job. Be sure to hire a contractor is licensed, bonded, and insured. By hiring a commercial contractor experienced in working with businesses similar to yours will help make the construction process more efficient and successful.

Once hired, the commercial contractor with working with you in obtaining the proper permits, outlining your construction project such as the required materials, and hiring the skilled labor to fulfill the project. In addition, the contractor will schedule the when the construction crew and subcontractors will operation.

HOA board members and property managers have the task of preserving a safe and community-oriented environment for all HOA Members. One of their obligations is choosing the right construction contractor to perform services on their communities. However, many HOA officials find it appealing to seek out cheap contractors, failing to recognize their poor quality craftmanship and service. However, this blog post will inform you the why you should hire a quality contractor to protect your HOAs property, bottom line, and your employment. The Importance Of Selecting A Quality Contractor For Your Homeowner Association If you are a board member or a property manager of an HOA, then you know how often you must seek construction services. Whether its general maintenance, repairs, ADA Compliance, renovations for your clubhouse, or any other structural upgrades. Community officials are responsible for selecting contractors for the jobs. As well as, coordinating the project to construction company. In addition, they must oversee those construction projects in the community and hold the general contractor accountable for their results. Typically, HOA board members or property managers fail to gather a selection of contractors. Often, they opt for the first general contractor that comes their way or select the least expensive one. However, failing to select a quality contractor can lead to both short- and long-term liability for the HOA. How To Find A Good Contractor For My HOA? Many board members and property managers just do not know how to find the right contractor. However, it is quite simple. Here are a few tips on how to find the right contractor for your HOA. • Google search for multiple local construction companies • Check local directories and review sites • Ask friends, coworkers, and family members if they know of a good contractor • Mention it on your HOA’s website that you are interested in partnering with licensed contractors Selecting A Good Contractor For Your HOA Many contractors will claim they are the “best” or “top” construction company in the industry. However, all this time this is a lie. To find out if a contractor reliable, skilled, knowledge, and overall good you must do some research. Here are a few steps you can take in finding the right contractor. • See what past customers say about their experience with the construction company o Read reviews and testimonials (if any) • Go to their website and review their portfolio or gallery of past projects. • Talk/interview multiple contractors • Receive multiple bids from contractors • Select the contractor you fill most confident and comfortable with What Kind Of Liability Do I Risk With A Bad Contractor? Construction is a very dynamic and high risked industry. Many things can go wrong if you hire a bad contractor. HOAs can face a variety of liabilities and consequences such as: • Safety – for example, if the construction company fails to clean up after a workday, and an HOA member comes by and steps on a nail or sharp glass. • Legal Issues – for example, if a contractor is not licensed and gets injured on your HOA, then you could be sued damages. • Delayed Projects – for example, if your HOA needs the pool area remodeled before spring, but the contractor is not even close to meeting that deadline. • Further Construction Work – typically a bad contractor will not get the job done the first time and may require another contractor to come in a fix or finish the project. • Upset Tenants – Often, construction can be inconvenient for many. For example, delayed projects can affect tenants plans to visit pool area if its still be remodeled in the spring. • Bad Reputation – Board members and property managers will face scrutiny by homeowners for hiring a bad contractor. • Financial Loss – the liabilities or consequences above can negatively impact the HOA’s bottom line. • Loss of Employment – Board members and property managers are responsible for driving successful results for the community. However, if this is not accomplished, then they get fired and replaced. How Quality Contractors Will Mitigate Risk There are many ways a quality contractor can help alleviate any potential risk as stated earlier in this blog. Quality contractors have the proper credentials to perform construction services. They deliver HOAs a professional and safety community environment. In addition, they provide quality results. Quality Contractors Are Licensed, Insured, and Bonded HOA officials need to work to find a licensed, insured, and bonded contractor to avoid any hiccups in the construction process. In California, general contractors a required to be licensed, insured, and bonded by the California State License Board. It is required for someone to be unlicensed and the perform a construction project with a value over $500 dollars. In addition, contractors must have current insurance both: workers compensation and legal liability. Workers compensation protects workers financial if they are injured from work. Legal liability protects the contractor if there is any property damage, accident, or injury on the job. Bonds are designed to fund a project to completion if the contractor is unable to fulfil the project. Anyone can verify this information on CSLB Website, as well as review any reported fines, penalties, or complaints against the contractor. Quality Construction Experience Quality contractors are well established with the resources, knowledge, and training to fulfil project needs. Good contractors hire skilled employees and seek the best materials for the project. They know what the best practices are to meet the project demands. For example, if they are unable to complete a specialty portion of a project, they know to subcontract out. Good contractors are safe contractors. Safe contractors provide proper signage and fence or caution of the construction area or site. They communicate with residents, board members, and property managers on the construction work, potential hazards, and inconveniences. Quality Results For Your Homeowner Association Homeowner associations are filled with tenants and visitors daily. It is important for HOAs to showcase the appearance of their community with the best quality craftsmanship possible. Good contractors deliver on quality results for your HOA which include the presentation and safety of your HOA during and after the construction process. Quality craftmanship provides proper support for structures built by the contractor. The longevity of these structures will save your community money on maintenance and repairs. For example, a good contractor provides fencing services, and installs a fence or wall on the exterior of the HOA. The quality of the fence and they way it was construction has made it durable. Structures such as walls and roofs will meet California seismic standards and sustain itself during seismic activities. The Homeowner Association And The Quality Contractor Despite the benefits of hiring a good contractor, tenants may challenge the decision of board members and property managers on spending more for a quality contractor. HOA officials need to be prepared to inform tenants on the short- and long-term benefits of selecting a great construction company, versus a cheap one. Eventually, HOAs will establish a long-lasting partnership with a reliable, convenient, and quality contractor. However, it is important to continuously evaluate and hold contractors accountable for their results. Summary Ultimately, board members and property managers are always striving to put the interest of the community first. However, they often get caught up in hiring a cheap contractor, who will cost the HOA more in the long run. It is important for them to hire quality contractors that will limit the amount of risk and cost of a construction project. Which will provide a safe and respectable environment for your community. Share your decisions with homeowners, with homeowners so they understand the merits of a hiring quality contractors and their impact on the HOA. Construction Blogs

3) Tenant Walkthrough

Throughout the construction process you want to be evaluating and observing the quality and reliability of the construction team. Be sure to hold contractors accountable for meeting deadlines and ensure quality and safety on the jobsite at all times.

Failure to evaluate your contractors progress can result in a lack of urgency, delayed projects, or other negative outcomes.

At the end of the project, the contractor should walk you through the property to explain everything that was done in the scope of work. This may be a time to address minor touch ups.

4) Certificate of Occupancy

The last step of the tenant improvement construction process is to obtain the certificate of occupancy. The certificate of occupancy is a document approves your property to be occupied and safely operated. Certificate of occupancy requires the property to be inspected, tested, and approved by city authorities prior to being improved.

Once approved your business can begin operating with your new tenant improvements.

open business

Summary: Tenant Improvement Construction

Tenant improvement is needed for tenants and property management to be successful. Tenants need property that is tailored to fit their business operations, landlords need tenants for their commercial space.

By working together tenants and landlords can establish a lease agreement that outlines the specifications of required tenant improvements, payments, and responsibility. Depending on the tenants needs and landlords’ flexibility will determine the desired construction project.

It is important for tenants to examine and negotiation tenant improvements prior to signing the lease of the property. Once agreed, tenants need to hire the right contractor to fulfill their project.

After the project is complete, tenants will receive a certificate of occupancy, which will enable the tenant to lawfully open their commercial space for business.

Partner With JMF Commercial Construction

JMF Commercial Construction is an experienced licensed contractor serving commercial and light industrial businesses, and HOA Property Management. We provide convenient and quality services to the Los Angeles & Orange County businesses.

To start your next commercial construction project today! Contact JMF Commercial Construction for an Estimate.

Email us at info@jmfcommercialconstruction.com or call us at (562)572-8354.

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