A lot of industry terminology exists within any business. In this case, particularly for the construction industry. Architects and builders can understand what they are talking about but the terms can be confusing for first-timers or outsiders. One such term is ‘interior build out;’ what is it and when do such construction activities take place?
An interior build out typically refers to starting from a white box or white shell, for commercial interior space, and implementing TIs (tenant improvements) for the new commercial resident. In other words an interior build out means finishing the interior of office or store space for the new tenant’s requirements.
Every tenant is different, with different needs, requiring heavy customization to finish the white box. As example building improvements for the interior build out can be constructed for the walls, ceilings, floors and more.
These tenant improvements may involve an architect for design of the interior – a specialty for many architects. The architect has to work with the builder to complete the construction. Often spaces had previous tenant finishing and this work must be gutted and removed to the state of a white box before new tenant improvements can take place for the interior build out.
There are requirements, in addition to the tenants’, for build outs; for example there are requirements for compliance with local building codes and restrictions. And the construction project must also be coordinated with the building engineer, tenant and landlord.
All of these activities add up to costs however it is not always exclusively the tenant who pays for them. It is common for leasing agreements to be structured in such a way as the landlord pays for some of the tenant improvements. What percentage of these improvements are paid for by the landlord is often subject of the lease negotiation. It can also depend on market trends and the type of space for the build out.
Since the fees of the tenant improvements can be negotiated with the lease, they factor into the TIA or tenant improvement allowance, which clarifies how much is covered by the landlord versus the tenant for the build out. For specific tips, a commercial real estate agent can provide recommendations on the legal terms and dollar values of tenant improvement allowances.
For more information see Buildrite’s Commercial Construction Services.