As the economy continues to expand (along with office tenants), office construction costs continue to climb. That’s due in large part to the strong economy as well as a shortage in construction labor and certain materials. In this post, I outline strategies for tenants to minimize their office construction costs. Thank you to Bill Conopeotis and Liz McCleary of ConopCo Project Management for their input on this post as well our long-time client Erik.
Under the Allowance Approach, the tenant is allotted a cash allowance from the landlord for construction and related costs. To the extent the total costs are less than the allowance, and if properly negotiated, the tenant retains the savings. On the flip side, if the costs exceed the allowance, then the tenant bears those excess costs. Outlined below are the pros and cons to this approach, common pitfalls and strategy to successfully implement.