Rent increases will be limited to the CPI measure of inflation plus 1%, with additional allowances where improvements have been made to the property.
Whether or not a failure to make sufficient allowance for improvements in the quality of goods causes most price indexes to be biased upward is a matter of dispute.
This could include several months of free rent while the gym converts the space, or additional tenant improvement allowances to help gyms defray some of the cost.
And when additional costs like tenant improvement allowances and leasing commissions are calculated, the deal could end up costing Mr. Rovt some $330 a square foot, brokers estimated.
Because there is a shortage of medical spaces for doctors, these tenants are sometimes forced to pay their own utilities and can be provided little in tenant improvement allowances, she said.
In the past, Trinity was more focused on preserving capital and remaining risk-averse, and would often accept lower rents in exchange for offering little in tenant improvement allowances or free rent.
Mr. Small said that his organization had noticed that landlords now seem to be more flexible in negotiating rents, as well as offering improvement allowances and periods of free rent, especially for spaces measuring more than 10,000 square feet and especially in downtown Manhattan.
Even large buildings typically have only one or two tenants; they are less capital-intensive because landlords do not offer tenant improvement allowances or other terms common in office leases; and the cash flow from the rent is mostly stable and predictable.
In an office building, the landlord has to provide a new tenant with tenant improvement allowances, pay the brokerage fee, offer some free rent, "and then if the small business went out of business, you have to replace the tenant with all the same expenditures," he said.
We've given them some T.I. — tenant improvement allowance — in retail.
