In this article, you'll learn:
- Why office landlords are offering higher tenant improvement allowance packages than ever
- How a high tenant improvement allowance drains a landlord's income
- What happens if your landlord can't deliver on the improvement allowance they promised
- How you can protect your tenant improvement allowance even if your landlord defaults
Since the pandemic, office landlords have been going above and beyond to lure tenants in to their office space and sign any lease agreement. Because with the looming threat of default, it seems a lot more favorable to shell out generous concession packages if it means securing a long-term tenant than to let their commercial space sit vacant.
In the process, they're giving up about a quarter of their income from rent payments on these over-the-top concession promises.
"Class A office tenants signing direct new or relocation leases of at least 20,000 square feet with lease terms of at least seven years have received an “astonishing” average 24% of their total rent as concessions, which include free rent and tenant improvement allowances."
-Costar
But with elevated vacancies and dropping occupancies, are office landlords really in a position to offer such generous tenant improvement allowances? Largely, probably not.
Many can't even pay for the debt service on their commercial building, let alone an expensive redesign.
So how can tenants still get access to their improvement allowance packages? Read on.
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