A client looking at a new warehouse space called me about Tenant Improvements. His company’s current space was too small, and his boss had challenged him to find a replacement. This manager inherited the current location and has never looked for a new space before, let alone constructed a lease.
Wow. This could be trouble. We spoke a while about the needs of the facility—how much space, the number of doors, the height of the building, and dock door requirements. He had a good handle on the basics, except when it came to the office and other details, like power and sprinkler coverage. That is where the discussion on Tenant Improvement Allowance—AKA TI—started.
A client sent me a warehouse specification package that he wanted me to review before it was released to real-estate brokers. In the middle of this specification package, under the heading Lighting, appeared a simple one-line specification: “The lighting shall produce 30 foot-candles (30FC) of output when measured 36" above the floor.”
The question in the title of this post is one that I have heard asked repeatedly in the past 25 years. My answer has always been the same — it depends.
In fact, there have been operations for which I pushed for more light than 30 FC in specific work areas, like receiving, returns processing, price ticketing, inspection, or garment sortation. Each of these tasks can require extensive fine work or reading to perform.
What makes a better deal for a tenant depends on the situation. How much working capital—cash—is a tenant willing to invest into a property that they do not own? How much working capital is a landlord willing to invest into an improvement that adds limited value to the property?
Unlike the typical residential real estate deal, in which a price compromise is made possible by a meet-in-the-middle attitude, commercial deals are more about solving the problem of meeting the needs of both parties. One of the most common problems is the difference between the rent the property owner wants and what the tenant is willing to pay. The solution is arrived at by working out what the value means to both parties.
There are four ways to make a work area brighter:
Do you have a favorite spot to read in your house? What kind of light is there? While some of us may have a dedicated reading lamp, others may have to contend with the décor that our spouses chose. The lamp where my father sat to read used a three-way bulb, which allowed him, at the turn of a switch, to crank up the wattage of the bulb from 50 watts to 150 watts.
All lamps have a burn life profile, the amount of light the bulb makes over its lifetime. We don’t notice it, but all bulbs grow dimmer as they burn. The concept of burning is accurate, as the electrical energy excites the filament in an incandescent bulb or the cathode in a metal halide or florescent bulb. Over time, the electricity and heat erodes filament or cathode until they fail.