Wednesday, July 18, 2012

How to Lease Commercial Property and Get the Fitout Right

commercial office reception fitout
Fitout needs vary from tenant to tenant

When it comes to leasing a commercial or retail property, the successful fit out required by the tenant will be a process of good design, approval and implementation.  The landlord, property manager, and tenant work together in this process.

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Depending on the type of property to be occupied, the cost of construction works within the premises may be very large.  Retail property and food type tenants have the most expensive and complex fit out arrangements; hence the costs of installation and construction will be high.


From a landlords perspective the important issues are to make sure that the fit out is complying with the building codes and function of the premises, and that the quality reflects in the property image. 

There is no point letting a tenant into a property with a low level of fit out quality that can detract from the other tenants in the same premises.  In a retail property this is really important.  The landlord is well within their rights to ask questions about things such as:

  • Design
  • Finishes
  • Make good at end of lease
  • Compliance to building codes
  • Layout
  • Staff levels and workspace layout
  • Customer access to the premises
  • Services and amenities to be used in the overall property
  • Construction times and access for builders
  • Air conditioning
  • Lighting
  • Electrical
  • Plumbing, etc

So the list goes on.  If you manage properties and many of them it pays to have some form of checklist to take you through the key issues that are of concern in the particular property.  The focus of the property manager and the landlord in working with the tenant is to ensure that all works are checked and understood before they are approved.

Fitout Design

Here are some other factors that could be useful in the fit out considerations for a property and a new tenancy fit out.

  1. Determine that the tenant has given you all the plans and drawings for the works intended.  They would normally include electrical, mechanical, structural, air conditioning, hydraulic, and plumbing.  All of the tenant’s works should correctly connect with the services and amenities in the property.  As part of that process, the tenant should comply with certain minimum standards when it comes to specifications of finishes and design; you do not want the new premises to detract from the other design issues in the property.
  2. Get the landlords engineering consultants to oversee any matters of concern that could impact the property function or operation.
  3. If the landlord approves the plans and drawings then the tenant must get the approval from the local building authority to the property changes and the fit out.  That would normally be a tenant cost.
  4. Identify the works to be done in the property and then set some constraints on when and how those works are to be done.  You do not want to disrupt other tenants in the property.
  5. The tenant’s contractor has to be approved by the building owner before they start work.  Of major concern will be the appropriate levels of insurance to protect the landlord from any events.

You can add to this list based on property type and location.  Importantly the right controls are exercised by the landlord or property manager on the tenant.  The end result can then be a great fitout.

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