Whether you are looking to launch your first brick and mortar business or your hundredth, creating the perfect commercial space for your business to be successful is essential. If you own the building your business will be operating from, you will have more freedom, but even as a tenant, there’s a lot you can do to create a win-win scenario for you and the landlord through a thoughtful commercial tenant improvement project.

In this post, we will answer some frequently asked questions about the commercial tenant improvement process. Knowledge is power, and we want you to feel equipped to create the perfect space to suit your business needs, whether that’s here in Bellingham, WA or wherever you may be.

Why Take on a Commercial Tenant Improvement?

If you’re lucky enough to find a space already suited to your business needs, you may not have to take on a costly remodel. Some new paint colors and a nice sign might do the trick. In many instances, however, the unique needs of a business don’t necessarily match the available rental properties in the desired location. This is when it’s time to consider a commercial tenant improvement project. Common reasons for commercial tenant improvements include:

• Aesthetic upgrades to set a mood. Particularly important for customer or client facing environments, improving the appearance of a space is also valuable for employee centers where the wrong physical work environment can impact employee productivity.
• Changes to layout to improve functionality. If your business is significantly different from the business that previously occupied the space, chances are, you may need a form and function revamp.
• Brand consistency. If you’re opening a franchise, you’ll likely have to follow certain brand guidelines for your new space, which could include a small or large tenant improvement. If you own a company that is launching a new branch, you may have more flexibility as to how much consistency you want between your branch locations.

Who Do I Want on My Commercial Remodel Team?

If you’re embarking on a commercial tenant improvement, you won’t be in it alone. In the early phases, before you start getting your heart set on the perfect vision for what your remodel will look like, as Jim Collins would say: Get the right people on the bus.

• Supportive landlord. Having a positive relationship with your landlord will pave the way for a smoother remodeling process. Ideally, you’ll be making improvements that will provide a value add to your landlord. If you can make a convincing enough case for the improvements, your landlord may even be willing to provide a tenant improvement allowance to help your budget.
• Knowledgeable tax advisor. Commercial tenant improvement projects can create tax implications. You will need to decide who pays for the remodel. Is it the landlord or the tenant? At the end of the remodel, who will own those improvements? To take a deduction for depreciation, you must own an interest in the property or the improvements. How you work through this can have a significant tax implication. Each unique situation should be run by a professional tax advisor.
• Skilled design-build firm. We’re a little biased, but we think one of the most important decisions in selecting your team comes down to hiring a skilled design-build firm. If you’re in or around Bellingham, WA, give us a call! An adept design-build firm will listen to your needs to come up with a design that best suits your business. At the same time, they’ll loop in expert consultation from their construction team to ensure that dreamy design that exceeds your expectations doesn’t exceed your budget. The ability for these two teams to work together early in the process can eliminate any unnecessary heartache and delays that come from paying for a sweet design package that, once taken to a builder, will cost triple your construction budget. Working with a cohesive design-build firm also allows for enhanced timeline synchronization, decreasing any unnecessary downtime until your business can start running out of the newly remodeled space.

How Long Does a Commercial Tenant Improvement Project Take?

Here at Highline, our design queue is typically booked out anywhere between two to six months. If you worked with a separate firm for design and already have your project permitted, there’s a chance we may have a build-only opening sooner. Getting through the design and permit process varies heavily based on the size and scope of the project and permit jurisdiction. Construction timelines also vary by project scope. Small spruce-up projects may only take a few weeks, while larger projects could take many months. At Highline, we primarily focus on mid to large-scale commercial tenant improvements in Bellingham and throughout Whatcom and Skagit counties.

How Much Should I Budget for a Commercial Remodel in Bellingham?

There’s no one-size fits all answer for this. Every commercial tenant improvement looks different, so the budget for each project does too. Remodeling a commercial kitchen, for instance, will likely cost more than remodeling a small storefront. Whatever type of business you run, there are several categories of expenses your commercial tenant improvement project will likely entail:

• Design. It’s common for architectural design and management and interior design to be billed hourly. Design costs typically fall within a range of 3-10% of the overall project cost, depending on the scope of work.
• Permits. Before you hire your design-build firm, make sure they will be managing the permit process for you. At Highline, though we manage the permit process, the permit fees are still the responsibility of the client. This may include a building permit, electrical and plumbing permits, and any special permits, such as fire protection permits for sprinkler systems, HVAC permits, or signage permits. Fees for these vary by permit jurisdiction.
• Construction. This portion of your budget covers materials, labor, management, and any subcontractor fees. You’ll need to figure out if a cost-plus contract (also referred to as a time-and-materials contract) is a better fit for you or if you want a contractor who will give you a flat project quote. In the former model, you are sure to end up with a fair arrangement. In the latter model, you run the risk of paying more than you needed to, but you eliminate the risk of your project going over budget (so long as there isn’t a need for change-orders).
• Loss of Revenue During Construction. Unless you have another location to temporarily operate out of, there’s a good chance your commercial tenant improvement project will require you to temporarily postpone operations, and therefore have a gap or delay in revenue to factor into your budget.
• Contingency. It’s always wise to plan a 10-15% cushion in your budget to plan for the unexpected.

If the budget for your project has you feeling overwhelmed, consider discussing the option for a tenant improvement allowance with your landlord or bring in the expert advice of your tax professional to see how your budget could see a helpful boost through any positive tax implications. You may even be able to seek out local grants. In 2022, the City of Ferndale, WA launched a grant program to help business owners revitalize main street through things like commercial tenant improvement projects.

Now that we’ve answered some of your initial questions, get an estimate by calling our team or filling out our quick online form. Let’s get your commercial tenant improvement in Bellingham, Ferndale, Lynden, Blaine, or Mount Vernon, WA started today!