When modifying office space, what ends up on your landlord’s tab? Part II

First, determine how your proposed layout will differ from a typical layout and whether or not your improvements would be favored by other tenants. The more your proposed changes differ from the norm, the more they will be considered a special-purpose build-out and decrease your negotiating leverage.

Research the standard size rooms for various functions and consider how easily your space can adhere to these dimensions. Overall, a combination of standard sizes — with 30-to-60 percent of the space as open-plan instead of private offices — will facilitate the landlord’s ability to lease to the next tenant when you leave. If you are installing improvements with little value for the subsequent tenant, you can expect the landlord to entirely amortize that cost within your lease term. However, if alteration costs will add value for future tenants, you should expect only a portion to be amortized.

As an example, light fixtures, particularly of high quality and efficiency, will last well beyond a standard term of five years. Solid-panel full-height doors, the ceiling tile and grid system, the sprinkler system and duct work to distribute heating and ventilating are all elements that will endure. On the other hand, carpeting and wall partitions resulting from your office layout may generate little value for subsequent tenants.

The bottom-line is, depending on several factors such as the creditworthiness of a tenant and the term of a lease, landlords are willing to pay for the cost of improvements requested by a tenant.