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Tenant Improvements

Tenant improvements (T.I.) are changes made to the interior of a commercial or industrial property by its owner to accommodate the needs of a tenant. In most jurisdictions, a building permit is required if any type of alteration is made to the tenant space. Alterations include demolition or construction of walls or full-height partitions, structural repairs and changes to the primary function of the space. The following are typically not considered alterations: normal maintenance, re-roofing, painting or minor changes to the mechanical or electrical system.

Many tenants are unaware that there may be construction costs in addition to the cost of the alteration itself. These additional costs are usually associated with bringing the space into compliance with current building codes governing: (a) means-of-egress (e.g., escaping the building during a fire); or (b) disabled access. Each of these areas will be addressed in turn.


Whenever a new commercial building is constructed, its owner must classify the function(s) of the spaces within according to the building code’s definition of occupancy. For example:

1) Group A (Assembly) includes restaurants and places of worship.
2) Group B (Business) includes offices.
3) Group E (Education) includes schools and day care centers.
4) Group F (Factory Industrial) includes manufacturing, packaging and repair facilities.
5) Group M (Mercantile) includes retail stores and markets.
6) Group R (Residential) includes single-family dwellings, apartments, townhouses and assisted living centers.
7) Group S (storage) includes warehouses.
8) Group U (Utility and Miscellaneous) includes agricultural buildings, barns, carports and garages.

Whenever a new tenant moves into a space, the space must be re-classified according to its new use which may, in turn, trigger a number of construction requirements. For example, let’s say a tenant wants to open a day care center (Group E) in a building previously classified as a warehouse (Group S). A change in occupancy sometimes means the space is no longer in compliance with means-of-egress requirements. One factor is "occupant load", defined as the floor area (in sq. ft.) required per occupant. The occupant load factor (OLF) depends upon the function of the space. Warehouses have an OLF = 500, meaning that 500 sq. ft. is required per occupant. Therefore, a 10,000 sq. ft. warehouse has an occupant load of 10,000/ 500 = 20. A warehouse with an occupant load of 20 only requires one exit. Day care centers, on the other hand, have an OLF = 35, which equates to an occupant load of 10,000/ 35 = 286. With the increase in occupant load from 20 to 286, the space now requires two exits. The owner or tenant must not only determine where the second exit will go, but who will pay for it.

An increase in occupant load may trigger the need for other changes, including additional parking spaces and rest rooms. A certain fraction of the total number of parking spaces must be disabled parking spaces and, of those, a certain fraction must be van-accessible. Also, if the occupant load is greater than 10 persons, separate rest rooms for each sex are required. 

Changes in occupancy may also result in a "mixed-use occupancy", where a building contains more than one occupancy group. Let's say that a building is divided into 2 suites, each of which has been classified as office space (Group B). A tenant wishes to move into one of the 2 suites and use it as a day care center (Group E). This creates a mixed-use occupancy which, in this example, requires a 2-hour (if the building is not sprinklered) or 1-hour fire wall (if it is sprinklered) between the 2 spaces. A typical wall separating 2 suites would not be constructed as a 2-hour wall, and would require, at a minimum, several additional layers of fire-resistant drywall in order to meet code. The fire separation requirement would apply to the floor or ceiling if the building had multiple stories and the office was directly above or below the day care center.

In addition to the above, compliance with means-of-egress may require additional exit signs. In addition to illuminated, continuously-powered exit signs at all doorways along the path of egress, some jurisdictions require low-level and/or tactile (for the visually impaired) exit signs. 

The second area that commonly leads to unexpected construction costs is the requirement for disabled access, which is triggered by any type of alteration (see definition above) or by a change in occupancy. The areas which must be made accessible to the disabled include:

1) the building entrance.
2) the path of travel from the parking lot to the area being altered- this may require the addition of curb ramps or pedestrian ramps.
3) rest rooms.
4) pay phones (if present).
5) drinking fountains.
6) signage.

CADbuilt once had a client who was moving into a building previously classified as office (Group B). The occupant load was under 10, which meant that a single unisex rest room was all that was required. The new tenant, however, wanted to convert the space into a place of worship, classified as Group A. This triggered a large increase in the occupant load, which required the client to install separate rest rooms for each sex, each of which had to have disabled access. Accessible rest rooms require at least one toilet accessible to a person in a wheelchair, along with certain clearance requirements (e.g., a 60-inch clear circle for turning, minimum distance between toilets and sinks, minimum clearance from side walls, etc.).

Some T.I. projects may qualify for the "unreasonable hardship" exception. If the total cost of the alteration (excluding what’s required to provide disabled access) is less than a certain threshold (based on the ENR US20 Cities average construction cost index), the most that will need to be spent on providing disabled access is 20% of the cost of the alteration. The threshold is adjusted yearly; in 2011, it was $132,536. So, if the total cost of the alteration is $132,000, the most that would have to be spent on providing disabled access would be ($132,000)x(20%) = $26,400.

In terms of submittal requirements for building permits, the following may also be required: 

1) If there will be significant changes to the mechanical (HVAC), electrical or plumbing systems, those plans may need to be prepared by a licensed MEP (mechanical/ electrical/ plumbing) engineer. 
2) If structural repairs or modifications are required, the plans will need to be prepared either by, or under the supervision of, a licensed structural engineer.
3) Depending on the state, it may be necessary to demonstrate that the lighting complies with energy conservation code requirements. In California, these are commonly referred to as Title 24 requirements.

Finally, there may be other changes required to bring the space into compliance with codes specific to its use. For instance, if the space will be used to serve food, compliance with local health department regulations will be necessary.

CADbuilt has prepared T.I. plans for a variety of commercial and institutional projects, including an apartment building, offices, churches, machine shop, day care center, coffee shop, hair salon, auto repair shop, etc. We work closely with licensed professionals to ensure that all necessary plans will be code-compliant.