Checklist For Hiring A Tenant Build-Out Company

Tenant build-out or leasehold improvements refers to all alterations or modification made to customize a leasable space for the occupant’s unique needs. The project can be implemented either by the tenant or the property owner, depending on the lease agreement.

Usually, it is a necessary first step taken by the occupant before they utilize the space. Businesses invest in tenant build-out for several reasons, such as:

  •         Aesthetics. When you’re starting a business, you want a presentable workspace or showroom. The office becomes part of your branding and promotions, which makes tenant build-out necessary.
  •         Efficiency. A well-designed workspace streamlines operations and increases productivity. The location of individual workstations, offices, and other rooms are designed to maximize efficiency.
  •         Accommodate furniture and equipment. Tenant build-out is done so that all office accessories are properly allocated. It also ensures that space can accommodate appliances in the future.
  •         Energy efficiency. Leasehold improvement can be done to replace existing electrical fixtures with energy-efficient models. This can greatly help lower operating expenses, thereby increasing the business bottom line.

Regardless of your reason for the leasehold improvement, you’ll need a reliable tenant build-out company to implement the plan. A leasehold improvement company has many responsibilities that include preparing cost estimates, coordinating with the architect and local regulatory authorities, applying for necessary permits, hiring subcontractors, overseeing the day-to-day site work, and organizing the entire construction process. Basically, the team works from scratch down to the final nail.

How do you choose the right tenant build-out company?

Finding the right tenant build-out company can be tough. Unlike general contractors, tenant build-out projects have unique requirements. Some aspects are unique and require an experienced contractor.

Although there are many construction companies, not all of them have adequate experience in commercial space renovation, particularly the paperwork involved in such projects. You want to hire a contractor that specializes in this niche.

Here’s a checklist to help you find the best contractor.

Ask for bids from multiple contractors

Ideally, you need to ask for bids from at least three tenant build-out companies. This will give you a better idea of the reasonable price for your project. In 2017, the average cost per square foot to build-out an office was around $196.49. You can use the existing national average to check whether a bid is reasonable or not.

Once you have bids, check each company’s profile, history, manpower, previous projects, and feedback from clients. Interview each contractor to know how they plan to implement your tenant improvement. This should also give you an idea about how they deal with their clients. Take note that communication is crucial in project implementation. Ask for references to get an independent opinion about their work. Better yet, you should try to visit their recently completed projects. This will give you a deeper insight into the company’s work.

Review the contract

Tenant build-out contractors from AFS General, Florida emphasize that aside from the bid, you should also check the contract of the tenant build-out company. The written contract must contain project specifics, such as estimated start and completion dates, an itemized list of materials, and total project cost. The contract should also include details of miscellaneous tasks and expenses like permit application, taxes, insurances, etc. Likewise, the agreement must specify penalties or liabilities in case the project is not completed as scheduled or as planned.

Payment schedule

Tenant build-outs entail hefty amounts. Discuss with your contractor a mutually agreeable payment schedule. Usually, you will need to initially pay around 15-20 percent of the total project cost. In some states, the down payment is even lower. To find out a reasonable initial payment, check with your local consumer affairs office.

Depending on your contract, the rest of the cost can be paid in increments. Ideally, you should be billed based on the amount of work completed. For example, if the project is almost 50% done, the company can collect half of the bill. Make sure the tenant build-out company is amenable to a progress billing method.

Check for hidden fees

Protect yourself against hidden fees. Aside from what’s written in the contract, you should also be cautious about the potential added costs that might be charged to you. As much as possible, avoid time and material pricing models as it does not come with specified billing of materials and work, as well as a cap on maximum budget. Without ceiling cost, the budget can quickly balloon. Don’t be intimidated to talk to your contractor regarding your financial concerns. If an item seems unclear or questionable, feel free to ask the contractor. A reliable tenant build-out company must be open to the requests of their client.

Watch out for red flags

Finally, before signing the contract, you should watch out for potential red flags such as the following:

  •         refusal to provide you with a written agreement, itemized list of materials and billing;
  •         request full payment upon signing the deal;
  •         unusually low bid;
  •         lack of an office address;
  •         lack of necessary business permits and certification;
  •         poor reviews from previous clients; and
  •         does not honor previous commitments.

Always trust your instinct. If you have uneasy feelings or doubts about the company, proceed with caution or look for a new one. Trust and confidence are vital when working with a contractor.

Final Thoughts

Tenant build-out is a major undertaking. For first-timers, it can be an overwhelming project. However, working with a reliable contractor can make things easier and doable. Hopefully, the checklist discussed above can help you find the best tenant build-out company that can carry out your project successfully.