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Office Move
3 minutes

Using Your Tenant Improvement Allowance Dollars to Your Best Advantage

Published on
December 17, 2024

It was a great relief to finally select a building and determine where the new corporate home of Interplan would be. 2650 Park Tower Drive was the WINNER! With the site secured, we were ready to take the ideas generated in the last iteration of our Test Fit designs and develop them into our final Design Intent Plan.

As the name implies, design intent plans reflect the intentions for the built-out expression of what had been only design concepts up to this point in the design process. At this stage, more attention is given to all areas of the interior floor plan, detailing how spaces will be organized, created, and finished. While not as detailed as Construction Drawings, these plans must include enough information about the intended final product to allow General Contractors to confidently provide budget pricing for the space's construction.

But we’re getting a little ahead of ourselves in this part of the story. Let’s back up and talk about Tenant Improvement Allowance (referred to as TIs or TIAs). TIAs were a key financial consideration during our initial review of potential spaces. Typically, these allowances are calculated by multiplying a per-square-foot dollar amount by the total square footage of the leased space. Like most terms in a lease agreement, TIAs are negotiable. Landlords offer them as incentives to help offset the costs of transforming the space from its existing condition to meet the tenant's needs. TIAs can be granted in many forms, all subject to the specific circumstances of the landlord and tenant, and when agreed upon, they are a part of the final lease agreement. They can be given as dollar allowances, reimbursements, services, or even rent-free periods.

Once the terms of the TIAs are agreed upon, it is essential that they be used to the tenant’s best advantage. When Interplan works with a client on their Test Fits, we have already been discussing what the most important features of their new space are to them. For spaces that host guests, customers, or the general public, the main entry’s impression is often prioritized, requiring investment in its design and finishes. Staff gathering areas to boost morale may warrant special features or upgraded materials. Highly tech-driven companies may allocate their budgets heavily toward systems, wiring, HVAC, and other technical infrastructure. In some cases, TIAs must also account for addressing unforeseen issues with the existing building, such as demolition needs, structural deficiencies, or uneven floor slabs.

Interplan went through the same process to optimize our own TIA during our build-out. After completing the Design Intent Plans for our new space, we were ready to contact several General Contractors to request budget estimates from them. As we do for all our clients, the information we provided on our own Design Intent Plans not only covered the general scope of work but also included detailed descriptions of the extent of demolition that would be necessary, types of special construction that would be required, finish quality expectations, and any other information that would ensure the estimates would be as close to the budget target as possible. Typical of our process, the contractors we asked to give these budget estimates were not necessarily the same ones that would be asked to give bids on the final design.

This phase helps bring a project into sharper focus. The Design Intent Plans illustrate a more thorough and detailed understanding of how design concepts will be brought into physical form. The budget estimates received from the General Contractors (based on these Design Intent Plans and the notes they contain) bring the financial implications of these design intentions into view. The use of the TIA dollars can then be prioritized so they are used to the new tenant’s best advantage. Strategies are then employed and become a part of the continuing conversations between the client, design professional, and contractor, ultimately leading to a cost-effective and successful move into a new corporate home.

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