Tenant Improvement Allowances (TIA) have been getting a lot of attention lately. Across the country and especially in New York, TIAs have risen since the start of 2018. For commercial real estate investors, New York Tenant Improvement Allowances. For many who are relatively new to investment properties, New York Tenant Improvement Allowances can seem like a confusing and abstract concept.
What Are New York Tenant Improvement Allowances?
Tenant improvement allowances are, in essence, the amount property owners are willing to spend for their tenants to build out or retrofit a rented space to suit their needs. TIAs are used for various reasons. For instance, if a franchise owner is renting out a portion of a lobby, TIAs will assist in making that space in-line with the franchisor’s requirements. More technical operations, such as software development companies or laboratories, may also take advantage of TIAs to create a functional workplace.
Always Negotiate Tenant Improvements
In most cases, New York property owners prefer to use TIAs to cover construction costs. Tenants may try to get attorney fees and permit charges thrown into the agreement as well. Furniture, equipment, and similar soft costs are typically off the table. That’s not to say that improvements are devoid of negotiations. Property owners and tenants alike will usually work together to find some common ground without placing either party in jeopardy.
Who Controls Construction?
With minor modifications or build outs, the property owner may want to oversee construction to have a very clear idea of where the allowances are going. In these cases, contract bis are usually viewed by both the tenant and the property owner to keep prices and change orders as transparent as possible. For larger projects, the tenant may want to oversee construction in order to keep things within the set budget. If there are budgetary overruns, it is understood that the tenant will pay for any overages. The party in control should be negotiated before the lease is signed and prior to any construction work.
One of the big benefits of New York Tenant Improvement Allowances is that if a construction project comes in under budget, the remaining capital can be used by the property owner to improve other properties. Using TIAs correctly can create an attractive space for potential tenants.
Express Capital Financing provides funding solutions for property investors throughout New York. From acquisitions to construction and everything in between, our team will work with your to create a solution tailored to your needs. Contact our offices today to learn more.