Office spaces have not only gotten more expensive but also come with added issues of improvement and renovation costs that ultimately add to the expenses in the long run. The spiraling of the costs lies in the increase in the prices of petroleum products used in adhesives, carpets and contractor’s overhead.
The construction costs were known once but now they are facing the reality of greatly increased rents just to keep the owner’s return on investment. The dramatic increase in construction costs has made it difficult for the owner to avail the necessary TIA.
Because of this, office leases will become similar to the automobile leases where you don’t become aware of the final lease cost until summarization of individual office lease transactions. Cash contributions from the owners side towards tenant improvement has become limited due to this. It also results in owner’s bearing the burden of raised construction costs and the return on investment getting degraded substantially.