//What’s the Difference Between a Tenant Improvement, Build-Out, and a Leasehold Improvement?

What’s the Difference Between a Tenant Improvement, Build-Out, and a Leasehold Improvement?

If you’re on the hunt for a commercial space to rent, you’ve likely heard of the terms tenant improvement, build-out, and leasehold improvement regarding the space you’re looking to rent. You may have heard one, or two, or all three of these terms. Maybe you’ve heard different people say different terms. Do you happen to know the difference between the three?

In short, these three terms are basically the same when looking into a commercial business space – they are all structural and/or architectural changes needed to make the space better in order to meet the needs of your business. The main (and only real) difference is the industry you are in and also the person you are speaking to, but these three terms reflect the improvement or work that will occur in a commercial building before a new tenant moves in.

Tenant improvement is often used by commercial real estate agents, while build-out is a term more regularly used by those in the construction industry, and accountants prefer to use the term leasehold improvements.

Regardless of the term, these are structural or cosmetic changes that need to happen in the leased space before a new business can move into that space. Some improvements include a remodeled floor plan, including adding a reception area, counters private offices, lighting upgrades, technology upgrades, less walls, more walls, more plumbing, new floors, new paint job, and other tenant improvements.

These improvements can cause a business a lot of money, especially if the landlord does not contribute much financially. For smaller or startup companies, it’s a good idea to look for spaces that either need less work, are more suitable for your business, or where the landlord allows you to do the improvements yourself. Sometimes, costs are paid upfront by the landlord and are part of the tenant’s rent throughout the year. Some landlords will negotiate with tenants for a tenant improvement allowance, where the tenant doesn’t have to pay all or any of the improvement costs. Often, the landlord will agree to pay if he/she thinks it could help sell the place better in the future after you leave.
Below we’ve developed and shared a FREE cost calculator for you to use to get an idea about tenant improvement costs.

Cost to Buildout Commercial Space Per Square Foot Calculator

Tenant improvements/build-outs/leasehold improvements only benefit the single tenant in a space – not an entire building – that’s a building improvement. If a common area or lobby needs to be improved, it is an opportunity for the building to be improved improved which would benefit all tenants.

These tenant improvements are a business asset because they are attached to property and can depreciate. The tenant should keep track of all costs of the improvements for a tax advisor.

The downside of tenant improvements is that they cannot come with you once you leave a space and the money you spent on the improvements isn’t recoverable (a tenant cannot pull out a new bathroom or wiring or new walls) unless there are some things you can remove. Many tenants spend too much on tenant improvements and cannot take any of the money/work they put in with them. As a business about to embark on a tenant improvement, it is a good idea to consult with a contractor, realtor, and tax advisor to find a space that makes the most sense for your businesses’ needs and your finances.

Looking for Tenant Improvement Construction in Jacksonville?

No matter what you call it, our experts at Hurd Construction Management can execute the improvements to a space to fit your business’ needs.
When looking for a contractor to take on your tenant build-out or tenant improvement project, we take pride in understanding your business. Hurd will deliver a space that reflects your company’s brand, needs, and budget.

At Hurd, you will get the best contractor for your commercial tenant improvement job. Our Hurd Construction team has a combined 75 years construction and architectural experience that we bring to every project. We have completed more than 2.6 million square footage of new construction, renovation, and improvement projects on different types of buildings in many different industries.

Looking for tenant improvement construction for a commercial space? The Hurd team provides superior construction and design services. We work with clients across the southeast. We have offices in Jacksonville and Orlando, Florida. To contact us at Hurd, email us or call our Jacksonville office at 866-231-2477.

By | 2019-05-02T07:31:42-05:00 May 2nd, 2019|Blog|Comments Off on What’s the Difference Between a Tenant Improvement, Build-Out, and a Leasehold Improvement?