~10 Leasing Insights ~
Broker tips to better deals
Tip # 8
Trade Fixtures vs. Tenant Improvements
The shell of a building (floor, roof, walls and basic systems like heat) are often called the envelope. Everything inside the envelope falls into one of two categories – Trade Fixtures or Tenant Improvements. Tenant Improvements (TIs) include the office space, restrooms or any other generic improvements to a building that any future tenant will typically utilize. Trade Fixtures are the improvements specific to a user’s business. These might include ovens in a commercial kitchen or machines in a factory. By law, as soon as something gets permanently attached to the envelope, it becomes a part of the building and is owned by the landlord – unless it’s a Trade Fixture which remains the tenant’s personal property.
BROKER INSIGHT: Nothing in life is always black or white. The line between TIs and Trade Fixtures is no exception. If a standard user needs 5 -10% office improvements in a warehouse, and you need 25%, 50% or 75%, the question of who pays for the excess build-out in what proportion will make or break a deal. In practice, a variety of factors may include, tenant’s credit, market condition, LL’s cash position and many others, determine who pays for TIs. Often finding a building with the required improvements already in place will go a long way towards getting a functional space for your business at a price you can afford.
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