Commercial Upfits: Entice New Tenants with Customization

Types of Commercial Upfits

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The term “upfit”is a broad umbrella that encompasses many types of interior alterations to a commercial building. Upfits can be simple, relatively quick updates that don’t bring an added functionality to the space, or they can be complex, large projects that transform a space and provide turnkey functionality. Below are some of the common types of commercial upfits:

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• Cosmetic Upfits: As the name suggests, cosmetic upfits focus solely on the appearance of the space, making changes to things like paint color, lighting, flooring, and other non-structural aspects of the building.

• Functional Upfits: This type of upfit focuses on what the building can do for the tenant, or better stated, what the tenant needs the building to do for them. Things such as customized electrical wiring, plumbing additions, partitions, and HVAC work are types of functional upfits. A good example of a functional upfit would bethe installation of drain piping and a specialized HVAC system for a space designed for a surgery center.

• Full Build-Outs: The most complex type of upfit, a full build-out changes the structural make-up of a building, often stripping most of the existing structure to the frame or foundation. Full build-outs are less common than other types of upfits, but sometimes can be a necessity for older buildings that need a lot of changes or need to be updated to meet new codes and regulations.

Using Upfits to Attract Tenants

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Landlords have a significant investment in their buildings and want to maximize their pool of potential tenants. But if a space is built for a certain purpose, they are boxed into only going after a certain type of tenant. Think of the process of looking for a new home. You have many factors to consider on your wish list such as location, visual appeal, number of bedrooms, the size of the kitchen, etc. All these things may be difficult to find in one pre-built home.

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Tenants are in the same position, looking for the perfect combination of wish list factors when they search for their business space. If landlords can offer customization to the tenant, it makes their offer much more attractive.

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In addition to the enhanced ability to attract new tenants, landlords who offer upfits to existing clients can benefit from extended lease contracts. Tenants who know that their landlord is invested in keeping their space modernized, both visually and functionally, are more likely to sign long-term agreements.

Incentive-Based Upfits

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Getting creative with upfit incentives is a great way for landlords to partner with tenants to make the upfit process mutually beneficial. There are no right or wrong ways to structure incentive deals, and the beauty of incentive-based upfits is that they can be customized to meet the needs of the tenant and landlord on a case-by-case basis.

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Offering extended lease contracts tied to an agreed upon upfit schedule and budget is one way to entice clients to stay. These types of arrangements involve an agreement whereby the tenant signs a long-term lease in exchange for regularly scheduled renovations to the space. Deals like this give the tenant peace of mind that their space will be taken care of for the length of their stay, and it gives the landlord long-term recurring income.

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Another incentive-based upfit deal is structured around an allowance given to the tenant by the landlord for upfits to be made at the tenant’s discretion. The advantage to this type of deal is that the tenant gets full control over what the renovations will be and when they will take place. For the landlord, these types of deals help land new tenants and also remove them from the responsibility of planning and managing the upfit projects.

Conclusion

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Upfits are a great way to keep a building modern, up-to-date, and functional for a variety of purposes and they extend the value a landlord can offer to their tenants. They are a great tool that can help landlords stay competitive in a tough marketplace as they compete for longstanding tenants. King Construction has been performing commercial upfits, both simple and complex, for over 40 years. We’ve customized spaces in a variety of industries such as hospitality, medical, food service, and many more, and have the experience to perform your upfit exactly to your specifications.