5 Things to Remember During a Tenant Improvement Project

Property Manager Perspective

Tenant Improvement Project (s) are physical alterations to rented space on the tenant’s behalf. Those enhancements may include creating an office out of unfinished floor space, installing energy-efficient lighting, building a dramatic staircase between floors, or simply putting up a wall or painting/carpeting. 

No matter what improvements are being made, there are several things to watch out for.

Tenant Improvement Project - Bradford Management company
Photo by Jose Losada on Unsplash

The Budget

Some leasehold improvements are fully or partially paid for by the landlord, while others are shared. Be sure that what was negotiated in the lease is clearly defined for everyone.

· Tenant Improvement Project Allowances: The amount of money a landlord will spend on leasehold improvements for the tenant. They usually state this amount in the lease and may be a fixed sum or a per-foot amount. 

· Turnkey Job: The landlord pays all the costs for tenant improvements, usually before the tenant moves in. The landlord is in complete control of the work.

Pricing for the project is based on the size and the project from design to completion.  Be sure that everything is outlined and that all parties agree with the budget before beginning the project.

The Design

The planning stage may be the most critical, as it sets the foundation for the entire project.  Be sure your team has defined the project itself, identified timeliness, and uncovered the project’s entire scope from beginning to end. Don’t overlook the importance of overcommunication. Don’t let details (large or small) fall through the cracks — this can cause a domino effect that can ripple throughout the entire project.  From the tenant to the construction manager to the property manager to the owner, be sure that everyone agrees with the design and timeline.

Project Performance

Once you understand what the project entails, it’s time to monitor the project to ensure that it’s running on schedule and within budget. This is like a finely coordinated Broadway performance.  The audience is the landlord/owner, and the goal is to ensure that they are satisfied at the end of the performance.  Ensure that the correct materials are in order and the delivery timelines meet the scheduled project deadlines. Check that all materials incorporated into the structures and buildings meet the quality requirements and the project specifications. Ensure that you order materials of the correct specifications. Late or incorrect materials can delay the project and cause additional costs.

For example, make sure your electrician knows what type of Romex to bring for the specific job they’re doing. Check the materials when they arrive to ensure that they aren’t damaged and that they’re of the correct specification.

Reject items that are damaged or aren’t correct and advise the supplier immediately, then mark the items clearly as being non-compliant so they aren’t accidentally used.

Avoid Scope Creep

Even some of the industry’s largest companies can get swept away by scope creep. When tenants make change after change, before you know it, the project has ballooned to an unreasonable level, and you have workers cutting corners and using lower-quality materials. Talk with all the stakeholders about the scope and make sure everyone is on board. This is where communication is key!

It’s important to understand the quality standards and specifications of the job. These standards should usually be clearly stated in the construction document and in the project specifications and construction drawings. 

Document, Document, Document

Every agreement made regarding a project needs to be backed up with a written and signed contract, with no exceptions. Foremost, this delivers the scope of work without ambiguities, so the parties involved won’t risk a breach. It also helps clarify expectations, like timelines and budgets, which are essential for a successful construction project. Contracts are documentation that could become evidence in legal disputes. Although construction projects rarely end in litigation, it happens, and contracts can expedite a decision.

Other articles that might interest you:

Why Should I Hire a Property Management Company?

What is Construction Management in Commercial Real Estate?

January 26, 2023

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