TIs for Industrial Tenants

Based on the highest ranked content on WSO, here are some key points to consider for tenant improvements (TIs) in industrial properties:

1. Functionality and Aesthetics:

   • Tenants are increasingly concerned with the aesthetic of industrial buildings.
   • Functional aspects such as truck courts, dock doors, power, column spacing, clear height, and slab thickness are crucial.

2. Operational Efficiency:

   • Operational efficiency impacts operating expenses (OpEx), which are passed through to the tenant.
   • Different types of lights and HVAC systems can affect these costs.

3. Clear Height:

   • For a class-A bulk building, the standard is at least 32' clear, with a preference for 36'-40' clear.
   • For regional distribution centers, 28'-32' clear is good.

4. Cap Rates and Tenant Creditworthiness:

   • Cap rates are highly dependent on tenant creditworthiness and in-place rental rates compared to the market.
   • Buildings with low re-tenanting costs and high functionality tend to achieve higher sale prices per foot.

5. Tax Abatements:

   • Tax abatements can significantly impact rental rates, making properties more competitive.

6. Roof Lifespan:

   • The average lifespan of an EPDM or TPO roof is 18-20 years. Anything beyond that should be assumed to need immediate replacement.

Given these points, whether $10-15 PSF is enough for TIs in a Tier 1 market will depend on the specific needs of the tenants and the functionality of the space. Dividing the 100k space into three smaller spaces and one warehouse will also impact the TI costs, as different spaces may have different requirements.

Feel free to ask more specific questions if needed!

Sources: Industrial Properties - What are the key things to know?, Value creation in different RE property types, Retail IS/Acquisitions: What should you know?, HOW DO YOU DETERMINE YOUR UNIT MIX?, Multifamily Rent Per Square Foot vs. Rent Per Unit