Retail space tenants who will be doing buildout on their space should know exactly how the space is being delivered from the Landlord as this has significant impact on the tenants build out costs. The landlord may deliver the space in “as is” condition, warm vanilla shell or cold dark shell. The condition of delivery is usually negotiated in the letter of intent and formalized as an exhibit in the lease. Many retailers hire contractors before they sign a lease to review the space and the landlords work letter. The best retailers understand the gap between what the landlord is delivering and what they need to finish to open for business.
The budget proposal from a contractor will often be sub divided to into categories such as general conditions, site work, doors and windows, finishes, special construction (i.e. fire alarm and wet pipe), mechanical, electrical, and insurance. Initial startup costs such as tenant build out should be carefully reviewed and understood before signing a lease especially for new tenants who are often undercapitalized. Any money that is overspent on the build out could have been used as a cash cushion during operations. Let’s be careful out there!