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Why does this Tenant Improvement Cost So Much?

    I’m often asked questions like this in the early phases of a tenant improvement. The client has many questions during early phases of an office relocation, and they normally would prefer to pin down the cost question quickly, so they can make a decision whether to move forward.

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DesignLine Architects, LLC
470 E. Canyon Creek Court ,
Gilbert, AZ 85295
Phone: 4807103861

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Early Construction Cost Estimate Confirms Tenant Budget in Gilbert.

Gilbert Construction Costs have Many Variables.

“We just want to convert a storage closet into a small break area and move a few walls. “

“How much do you think it will cost for our remodel?”

Clients call me with questions like these who are considering the remodel or relocation of their Gilbert business.  After the prospective landlord offers a tenant improvement allowance, I’ll get a call asking me to confirm if the offered will be sufficient to cover any costs incurred during the commercial remodel, hoping they will not have to come out of pocket to pay for the construction and design work.



Yes the question is simple, but the answer is never easy and usually followed by a series of disclaimers, taking away all value to the answer.

When lease negotiations start to move quickly, the prospective tenant can understandably become very frustrated when they are asked to execute a contract before fully evaluating their financial commitments.  And when the cost of the tenant improvement cannot be established upfront, it makes the decision more difficult to accept any lease offer.

Many Gilbert businesses these days are choosing to make a few minor revisions to their existing office space instead of building a new office building or even undertaking a tenant improvement.  Whether dividing up office space to sub-lease a portion of it, or making changes that improve productivity, or attract customers, companies are searching for ways to increase revenue with minimal expense.

Tenant Improvements Costs are Not Easy to Determine.

Despite the fact that your tenant improvement design may appear to be the same as your last one, in truth it has never been built before.  Many of the workers that have been hired for your project may not have ever worked together in the past.  These new workers may require training in order to address the special conditions of your unique space and be required to interpret a design they have never seen before.  It is this diverse combination of workers as well as the unique conditions of your project that drives the fluctuating, unpredictability in labor cost.

Moving walls for tenant improvements is not as straightforward as most people think.

Actually, walls are not moved at all.

  • – Existing walls are demolished, and new walls in different locations, are built from scratch.
  • – Moreover, changing wall locations requires moving HVAC vents, light fixtures, sprinkler heads, electrical wiring and outlets, telephone and data cabling, and sometimes moldings or wainscoting.
  • – Where existing walls are demolished, entire new areas of flooring and ceiling material are usually needed, because simply bandaging the wounds left by demolished walls would be unsightly.
  • – This means re-carpeting an entire room or an entire office suite, so the carpet matches throughout.

Many subcontractors (trades) are needed to relocate even one wall, so a General Contractor (GC) must be hired to coordinate the necessary sequence of events amongst the various trades. The GC will hire framing, drywall, HVAC, electrical, cabling, flooring, and demolition trades, and charge a management fee about 10 – 30% above and beyond the total trade’s fees.   A minimum amount is charged to make it worth their effort, so small tenant improvement projects in Gilbert can cost more per square foot than large projects.

Construction Cost Estimate

So back to the all important question, “How much will it cost?”

Alternative Approaches to Remodel Cost Estimates.

  1. The traditional, old school approach to answer the question of construction cost, is to completely finish a details set of construction drawings (CD’s), and then request competitive bids from at least 3 general contractors.  Although this traditional method has been used since the beginning, it doesn’t provide the Owner (tenant) with the final construction costs until too late in the game, many times requiring a stressful period of redesign, rebidding and schedule delays.  In addition the General Contractor (the man with the most construction cost knowledge) is kept out of the early design process.  As a result and for many reasons, many design professionals have abandoned this dated approach.
  2. What has proven to be a more preferred, modern approach is called the Design/Build approach.  Once the Architect has prepared a preliminary space plan, the General Contractor is brought in to the team to not only provide valuable construction advice, but also to prepare a reasonable cost estimate to pin down the cost question quickly, so the Owner (tenant) can make the decision to move forward or not.

Generally, the Design/Build approach works like this:

  • – Once your preliminary space plan design is approved, your general contractor will ensure the project remains on budget, by preparing a construction cost estimate to within a +/- 20% range of variability (we can help you choose a contractor).
  • – Then when the construction documents are 75% complete, we will again work with your contractor to refine the construction cost estimate to within a +/-10% range.
  • – And when the final project is bid to the subcontractors, the prices are locked in, assuming no design changes.

About the Author

Doug Rusk is the principal at DESIGNLine Architects, LLC located in Gilbert, Arizona.  We specialize in residential and commercial remodeling for small and medium sized businesses with expertise in space planning and interior design consulting.  We’ll provide your General Contractor a thorough preliminary design packages that will enable an early construction cost estimate to confirm your budget quickly.

Gilbert Architecture Firm
Doug Rusk, Architect
DesignLine Architects, LLC
Gilbert, Arizona
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