Space: What are Leasehold Improvements
When you lease office space you generally get a concrete floor and a
suspended ceiling, complete with ceiling tiles. At least this is the situation
when you rent space in a new building. Heating, ventilation and air-conditioning
(HVAC) will also be provided and is usually integrated into the ceiling. The landlord is required to provide
even heating and throughout your space. Your
lease agreement will spell out the hours and quality of operations, because
many buildings will only heat and ventilate to business-hours standards on weekdays.
Review this with your Landlord (or his agent) when you inspect the site.
Leasehold Improvements are the changes you make to the space and building systems
to make the space work for your needs. All the
walls, carpeting and doors you add to the space that are permanently attached to
the building are referred to as "Leasehold Improvements". These
leasehold improvements revert to the landlord when you vacate the space at the
end of your lease.
If you are leasing space that has been previously occupied, you may have
the benefit of some pre-existing tenant improvements, ranging from walls,
flooring and carpets, enhanced lighting, maybe even plumbing (for a coffee
area/kitchen). This could reduce the costs of bringing the space to your standards.
If you are considering a specialized use for space (a
restaurant, for example) it is helpful from a cost perspective when the prior
tenant has already made improvements to bring the space to "code", for
example extra washrooms and kitchen electrical, gas, plumbing and
ventilation. You should consider, though, that if the prior tenant is out of
business, the location might be partly to blame.
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