Need advice on build out of single tenant building

[John McKee]

I have a standalone former drive thru bank that is now a vet clinic.  The vet clinic wants to expand the building at their cost into the drive thru area as they don't need the drive thru.  Should I charge them more rent to take up more space?   My thought is that the the drive thru is the most valuable part of this property in case I need to release it.

[Dustin Tucker]

I don't know the exact location of the property, but from my perspective a lot of former drive throughs are being replaced or no longer used, especially at former bank properties.  

To answer your other questions, you would be able to charge more for the additional space, but I would think that would be negotiated when you make the modification allowing them to convert the drive through space.  I would think that if the tenant is paying for the addition, they would want to have a minimum of a 5 year lease, if not a 10 year lease in place in order to pay for the improvements.

As in any real estate investment it is risk reward, I think with the current market and a stable vet tenant, that if you can get a 5+ year lease, it would be worth it to let them expand.

If you are worried about value, you could always talk to a commercial real estate appraiser.