Charge rent during commercial upfit?

[Andrew Laing]

How do you handle tenants rent during their upfit? We have a new construction project that has shells for the tenants. Do you charge them full rent from day one? Give them a break during construction? Thanks for any insight.

[Eric Weireter]

@Andrew Laing

If we manage the upfit we do not charge rent until "Substantial Completion" which is defined in the lease. Then any negotiated base rent abatement does not take place until the first full calendar month. So, if substantial completion occurs mid-month, the tenant will pay pro-rated base rent during the remainder of the month, then the base rent abatement period begins at the first full calendar month. Any OPEX charge/reimbursement does not get charged until substantial completion and will even be charged during the base rent abatement months. 

Now if the tenant manages the upfit, we are charging rent from Day 1. This is because the construction timeline / delays are out of our control and we don't want the upfit dragged out. So, if the tenant is paying rent they are more than likely to ride their contractors' tails so that they can get in the space and start making money to pay their rent.