Breaking Down the Budgeting Process for Tenant Improvement Projects

READ MORE \| Tenant Improvement and the Needs Assessment Process

Before diving head-first into your tenant improvement project, understand what goes into the budgeting process:

Architects & Designers

The first expense to include in your project is the fees required by any professionals you may hire. To begin, this includes both architects and designers; according to Design Search Associates (DSA), architectural fees are typically in direct proportion to the cost of construction:

“A higher construction cost represents more complex details and finishes, this includes the use of different equipment, usually when a construction site requires the use of equipment like overhead cranes, pavers and graders the cost will be higher,” writes DSA. “More complex details and finishes require more time-consuming design services. Thus, a higher-end space requires higher design fees.”

The same theory applies when hiring a designer for your project. Typically, design fees range from 10% to 18% of the project cost, which will depend on the construction’s level of complexity.

Tenant Improvement Allowance (TIA)

To cover renovation costs, landlords employ something called a “Tenant Improvement Allowance” (TIA) in most leases. Before beginning your project, develop an understanding of how much will be offered and for what services.

Construction

When planning for construction costs, the fees charged by contractors may vary depending on your specific agreement.

• Hourly rates
• Generally $50 – $150 per hour
• Some offer a Time and Materials (T&M) agreement, or hourly rate + materials
• Rates per day
• Contractors: averages $300 – $500 per day
• Subcontractors: averages $150 – $250 per day
• Pre-construction
• Averages between $150 – $1,000, depending on project size
• Most contractors apply some or all pre-construction fees toward overall construction cost

Additionally, contractor rates typically include the following contributing factors:

• Project size, type
• Location
• Contractor experience level
• Markup
• Average 10% – 20%
• Labor
• Overhead and profit
• Staff
• Operations
• Marketing
• Liability, insurance
• Taxes
• Profit
• Insurance
• Liability
• Builder’s risk
• Worker’s compensation
• Pollution
• Building permit costs
• Averages $500 – $2,000

Visit our Contact page to begin planning your project’s budget with a construction professional today.

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