Often when a tenant tours through potential future office space, we often find ourselves trying to take a hack at putting a budget together.  The scope of work is often extremely vague and a tremendous amount of assumptions must be made.  How do you make financial sense of a project without wasting too much time and effort to determine if you should move forward?

1) Figure out what number will kill the deal.  Tenants planning a future build-out should be transparent about their budget expectations so the teams they hire can plan accordingly.  Tenants can often spin their wheels directing vendors and waiting for pricing for budgets that are way out of their price range.  If a budget comes back and the client says that the numbers need to be cut in half, some communication clearly didn’t happen at the start.

2) Use comps from past projects before getting too far into it.  As a time saving “gut-check”, tenants planning a future build-out should ask for their vendors to provide a budget range based on some recent comparable projects that sound similar to what they are envisioning.  This can be a quick way to make sure that the scope is likely to be within the ballpark before too much design and pricing exercises occur.

3) Attempt to get input at all levels.  It’s never too early for tenants to survey their needs internally – and the review process shouldn’t take very long.  The key decision makers might think they completely understand the needs of their future office space, but they should be encouraged to run early design concepts with their teams to confirm that their new office space won’t lack functionality they are used to.  For example, imagine a team of executives tour potential vacant office space and work with a project team on some space planning.  A budget is developed based off of the layout and then the lease is signed – yet nobody else in the company gets to see the layout until its too late.  The firm’s accounting staff report that they are concerned of noise because they are planned to be by the kitchen, and others are upset that the new office won’t have the small conference rooms they utilize in their current space.  This would would have been good to know before the tenant committed to the lease terms.

4) Get a handle on what the Landlord is offering.  It’s one thing to get a good handle on what the tenant improvement costs will be, but you need to be comfortable with what the Landlord is willing to chip in.  If you get a sense early on that the Landlord is not willing to pitch in to pay for necessary improvements needed to get your space ready, perhaps the deal was not meant to be and you shouldn’t be wasting your time.