Office Buildout

[David Dorau]

I recently acquired 3200 sqft of vacant office space from a bank. It is divided into two 1600 sqft mirror image sections. I have planned out ways to break it down so that I can rent as little as 400 sqft. The commercial appraisal that was done has the fair market rent at $13/sqft. I have a tenant interested in the 400 sqft space but needs a lot of buildout including an additional small bathroom. I have never negotiated build out before and I understand that I was going to need to add some walls and outlets anyway. How do I decide how much is a reasonable allowance and how much I put on the tenant? In addition, how do I bill the tenants share out? Just divide by length of lease? Also, since the tenant is renting so little space, is there a percentage of rent I shouldn't go past? Any suggestions would be helpful. Thanks in advance.