Build to Suit – Who Pays?

newconstruction.jpgThis question is from NP Cecelia in Portsmouth (VA):

I have a question for you, I am leasing a new property that I will spend approx $34,000 in contract work to build the inside clinic. Is that the norm or should I expect some type of refund post my lease for the money I put into finishing my portion of the building?

My Response: This will depend on what was negotiated in the lease. Often times, especially on a new construction, the owners will “build to suit”. They have to finish the building to code anyway, and they will often do so in a way that will meet your needs. Mind you, if you want something particularly fancy or specialized, you will often have to pay for the extra.

A friend of mind did something similar here in WA State. It was a new construction for medical office space. She was able to work with his architect/designer and have the layout build to her specifications.

This is where your homework comes in. What is common in your neck of the woods as far as leasing new construction? How competitive of a market are you in? Is this a specialized place or is the entire building medically oriented?

Readers: do you have any comments about this? Have you been involved in this sort of situation before? What did you do?

Comments 4

  1. I am in NC and am paying to upfit the interior of a newly constructed shopping center space. My square footage is about 1500. A lot of times, the tenant will be able to negotiate “tenant improvement” dollars, and get some of the money you spend on improving their property back from who you are renting from. Because, really, you are doing the owners a huge favor by improving their property! I say all that, and then have to tell you that my landlord will not give me any money back for improvements. 🙁
    But..he is working with me in that I won’t have to pay any rent until I am finished with all the construction and have opened the doors for business, which is good.
    While 34K is a heck of a lot of money, it sounds reasonable. How big is the space you are going to use?

  2. I haven’t had experience with this, but I would think in these economic times, one should dream the dream and ask for the moon…within reason. The construction and rental industry needs the dollars so they may be willing to negotiate. It never hurts to ask.

  3. I am happy to report that my landlord has committed to helping me with some of the cost of the build-out. “Onehealthpro” you were right…” It never hurts to ask”. Thanks to everyone for their input.

  4. Does anyone know how you can get grant money or a lon to keep a new practice afloat for the first 6-12 months? Locals just don’t want to help.

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