What it means
The allowance is set in the lease, often as an amount per square foot. It is usually paid out as the work progresses or when it is complete, subject to conditions such as submitting invoices, lien-free documents and proof that the space is finished and open.
Some allowances can be used only for hard construction costs, while others can cover design fees, cabling or moving costs. The lease decides.
Why it matters
The allowance rarely equals the full cost of the fit-out. Tenants need to know early what the real cost will be, so they can negotiate the allowance, the free-rent period and the other terms with facts in hand. The payment conditions also affect cash flow, because the tenant may have to pay the contractor before the landlord reimburses.
Restrictions on what the allowance may cover can change the project budget.
How HSM handles it
This is the reason HSM gets involved before the lease is signed. We estimate construction cost for your layout, including the work the building will require, so you can negotiate an allowance that fits. We also read the payment conditions with you and prepare invoices and documents in the form the landlord expects.
Because we self-perform so much of the work, our estimates rest on our own crews' costs, and the number you take to the table is more reliable.
What to plan for
Bring the draft lease to us before signing. A short review early can identify gaps between the allowance and the likely cost, when those terms can still be changed.
Ask when the allowance is paid and what paperwork is needed. If the landlord pays after completion, you may need to fund the work as it goes.