Comment of the Day: Tenant Buildouts 101

COMMENT OF THE DAY: TENANT BUILDOUTS 101 “Southwest will essentially ‘own’ that space so long as they are in business (or at least until the space is so old it would need to be re-done anyway), so it doesn’t much matter who holds the title. Businesses routinely make modifications to leased spaces when they move in, often quite major. In most office buildings, it’s assumed that when you move in you’ll gut the whole space and modify to suit. Retail too. (That’s one reason for the 3-year minimum lease!) Many chain restaurants get a long-term land lease and build their building on it; it’s mostly a financing thing, and the land owner probably won’t kick ‘em out in 20 years; and if that happens, they don’t care, since that building’s not worth much at that point, and is probably in need of a re-do anyway. You don’t see it much in residential because there’s so many and various units people don’t need to modify to suit, they just find another place. Also, people are cheap, and residence is a money sink instead of source. But at the higher end, where a few bucks doesn’t matter as much, I think you’ll find plenty of modifications done by the occupant, or by the landlord as a condition of lease.” [melee, commenting on Southwest Spending $150 Million To Expand Hobby Airport for International Flights]