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What is an "improvement allowance"?

An improvement allowance what the owner of a building will invest in improvement required by new tenants, and could include new offices, new flooring, paint for the offices or warehouse area, and expanded electrical circuitry.

A ‘turn-key’ agreement means the cost of the tenant’s new layout will be born entirely by the owner of the building, whereas an allowance is a fixed amount of money the owner will spend on the new layout with no guarantee the sum will cover the entire cost. Not all transactions, especially industrial, will be turn-key nor offer an allowance for improvements.

Warning for tenants: If you will need to bear substantial costs to upgrade/convert a space, make sure the lease you sign includes a clause that will protect your investment and tenancy if your owner loses his building through foreclosure.

#leasing #negotiation

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