Rising California Tenant Improvement Costs Are Leading to Higher Rents and Longer Leases…

Today’s tenant is looking for an office space that inspires. A space that reflects a brand or a company culture. A space that attracts the most brilliant personnel and is both welcoming and pleasing to clients.

Sometimes a good office build-out is all it takes to turn just any space into YOUR space. A tenant improvement allowance transfers the burden of paying for an office build-out to the landlord. This allowance, which is worked into the rent and lease terms, is provided by the landlord to build-out or retrofit a space to a tenant’s specific needs.

But tenant build-outs are becoming more and more expensive. Especially tenant improvements in Ventura, Los Angeles, and Santa Barbara counties.

The Cost to Build-Out Tenant Improvements Will Continue to Rise

The cost of office build-outs in Southern California will continue to rise in years to come. Much of this can be attributed to the imposition of energy efficiency standards for both new and renovated commercial buildings in the state.

Title 24, designed to decrease the environmental impact of buildings, has made office build-out and improvement project more expensive. The result has been landlords charging higher rental rates (for many, double-digit increases) and pushing for longer lease terms.

Therefore, whether a tenant is thinking about acquiring a new office or refurbishing an existing one, they absolutely must consider tenant improvement (T.I.) costs to customize the space to their needs.

So How Much Does Los Angeles, Santa Barbara, or Ventura Tenant Improvement Cost?

Getting an accurate cost projection for an office build-out is next to impossible without assessing the space. Other factors like the building type or lease size parameters can affect costs. For example, a new building in shell condition will cost more than a second generation building where the build-out can include some of the same finishes, doors, ceilings, etc.

Kirskey Architecture, an architectural design firm in Houston, TX, regularly updates a Tenant Improvement Cost Guideline available as a PDF on their site. Their most recent 2015 update projected construction-only costs for a 25,000 square foot plate that’s split 50/50 between offices and an open floor plan.

Standard Office Space
– $39 to $58 per square foot – This is the most basic space in a Type A building with standard finishes – standard 2×2 fineline ceiling, 18-cell parabolic lights, wood veneer standard doors, broadloom carpet, standard electrical and HVAC, no glass office fronts, minimum millwork and all plastic laminate.

Mid-Range Office Space – $53 to $67 per square foot – Upgrades include recessed direct/indirect light fixtures, full-height glass office fronts in aluminum framing, solid surface countertops, carpet tiles, plus more extensive electrical service, plastic laminate millwork, and HVAC systems.

Executive Office Space – $89 to $142 per square foot – Upgrades include drywall ceilings with indirect cove lighting, premium grade architecturally-rich woodwork doors and frames, glass office fronts in wood framing, painted drywall, extensive wood veneer millwork w/ granite countertops, more extensive lighting and custom fixtures, and broadloom carpet.

Keep in mind that these cost projections are guidelines only. Again, actual tenant improvement costs will vary based on a number of factors – for instance, the difference between Southern California labor rates vs. the Houston market’s and the previously mentioned Title 24 standards in California. These numbers are merely meant to be starting points prior to getting an actual quote or estimate.