Property Management: Negotiating Tenant Improvements in St. Louis Industrial Spaces

Industrial Blueprint

A Solid TI Agreement Sets the Tone for a Positive Relationship with St. Louis Industry Space Property Management.

For landlords, property improvements are expensive and inconvenient. However, the best St. Louis industrial space landlords know that absorbing the property management challenges of building TIs for their tenants is a good business decision. When you find a landlord that is willing to negotiate TIs with you, it’s a good omen for a long and successful tenancy.

Tenant improvements are how you make your space… yours. With the right design, construction and vision, TIs can turn an empty St. Louis industrial space in a historic warehouse into a creative, open-floor plan space for a design firm. Office TIs can make a space utilitarian or lavish, modern or classical, helping you use your commercial real estate space as an expression of your brand and values. There’s a lot more behind your TIs than just building a few walls, and the process starts with negotiating a TI allowance with the property management company or landlord.

Lease Components

Your base rent is just one of the economic components of your lease. If you only focus on that, you could be leaving thousands of dollars of value on the table. On the other hand, it’s important to your landlord and his property management company. They typically focus on it for three reasons:

  • Higher rents increase net incomes for owners.
  • Property management firms generally collect their fees based on the gross rent they collect, so they directly benefit from a higher rent.
  • The income from occupied spaces increases the capitalized value of the building.

The owner and manager both win when they get a higher base rent for the space. However, in a broader view, they also win when they have a tenant that pays their rent and doesn’t just execute a long lease, but repeatedly renews it. Offering generous tenant improvement allowances in St. Louis industrial spaces helps to ensure that this happens.

TI Negotiations with Property Management

When a property management company or owner includes a tenant improvement allowance in a lease proposal, it’s offering to partner with you to make your space work for your business’s needs. Typically, tenant improvement allowances are granted on a per square foot basis, so a $30 per square foot office TI allowance on a 5,000 square foot industrial St. Louis space means that the first $150,000 of build-out costs will be covered for you. Anything over that amount will be your company’s responsibility.

Generally, the generosity of the TI allowance that you receive is directly proportional to the rent that you pay and the length of the lease that you sign. Since your rent goes to the building’s capitalized value, small changes in it have big effects on a building’s value, giving your landlord an additional incentive to provide you with TI money. Going from a 3-year term to a 7-year term might not cost you anything if you lock in a good rate. It could actually save you money — but could net you $10, $20 per square foot or more in tenant improvements. That money makes it easier for you to create a space that you will want to stay in.

When you sit down with a landlord or his property management company to talk about your St. Louis industrial space lease, talk about their tenant improvement allowances. Landlords who take a long-term view of their buildings will work with you to craft a package that gives them healthy rent income, and gives you the help you need to perfect your space. Ultimately, TIs are a sign that your landlord doesn’t look at you as an income stream — he looks at you as a valued partner.

If you have any questions about tenant improvements, or about the process with a property management, give us a call at Clark Properties. We’re only a call way!

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