Most office space is not leased ready for occupancy. Usually office space is leased as a vanilla shell and must be “built-out,” or remodeled, according to the tenant’s specifications. The importance of your office’s physical appearance should not be underestimated. Law offices, in particular, require specialized and expensive improvements that must be worked out prior to signing a lease. On the other hand, if you are a firm with limited resources, do not get carried away with extravagant mahogany finishes.
Typically law firms and landlords will negotiate a tenant improvement allowance (“TI Allowance”) for the construction of the physical space. The amount of the TI allowance is hot button for negotiation and is generally calculated by the square foot. The more you get the better. Since a build-out requires a large initial outlay of capital, who controls construction is highly negotiated.
There are two main options for the build-out, a landlord controlled construction and a tenant controlled construction. The terms of the build-out will usually be specified in the “work letter.” Each has its advantages and disadvantages. A landlord controlled construction alleviates the hassles and complications associated with construction, but transfers control of the construction to the landlord. If you require unique improvements or have a strict dead-line this option may not be optimal. A tenant controlled construction gives you more control over the improvements, but comes with added responsibility and time commitment. This option is not advisable if you lack experience, therefore you should contact a real estate attorney to discuss the ramifications of controlling the build-out. Either way, it is important that your office look the way you want because you have to work there.
