Commercial Real Estate Dictionary

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Build-out

Definitions of Build-out
  • The build-out is the construction of interior improvements to a building's space for the tenant or occupant.
    The tenant is anxiously awaiting completion of the build-out of their new space so they can move in and get their business up and running.


What Is A Build Out?

The build out is the physical improvements made to a commercial space in order to make the space usable and functional for the occupant or tenant. These improvements are also known as tenant improvements.

Since occupants have different needs, commercial space is often built to accommodate a commercial tenant's specific needs. The physical improvements constructed including the walls, ceilings, doors, etc. are all part of the build out.

As a construction project, build-outs are designed by an architect. Many architects specialize in the design of interior commercial space. The build out will be physically built by construction contractors. If the commercial space was previously occupied, the previous improvements will be demolished and removed.

The architect and contractor will have to ensure the build out is designed and constructed in compliance with local building codes and restrictions. They will also have to coordinate the construction project with the landlord, building engineer and tenant.

The cost of build outs may be paid by the landlord, tenant or combination of both. Who bears the cost depends on the trends in the market, the type of space, and the negotiating skills of the parties involved.

The tenant improvement costs are negotiated in commercial leases as part of a tenant improvement allowance. This is an amount of money the landlord will contribute to build out the space for a tenant. A commercial real estate agent can advise on what the terms and amount of the allowance should be.


        

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