Leasing and TI recouping Commercial Real Estate...
First time leasing commercial space with the tenant requesting TI improvements. I'm willing to provide some funds for the improvements but not sure how to account for it (what's enough not enough) and how to recoup (or can I)?

The building is not that large as had a previous use that would be fairly similar to the perspective tenant. If I provide funds for the improvements,  can I increase the lease rate to account for the improvements. 

Random example, if I'm getting $1 a foot lease and thr improvements cost me $.30 a foot averaged over the duration of the lease, can I request rents of $1.30?

Any help would be appreciated.
[{"id": "iochrhk", "text": "Yes.\nTake the amount spent in TI into account for your lease rate.  Imaginary figures, but say you were asking $20/sqft per year as is, or $24/sqft with a certain amount of tenant improvement work corresponding to the extra $4/sqft times your lease area.\nYou may or not be able to recover all of it during the lease.  Also new some work may be of value to a future tenant (extra bathroom or accessible bathrooms or new electrical panel) but some likely not  like paint or flooring.\n\nReally depends on how nice your space is.  If it is in great shape, does it need a lot of work?  Up to you to decide.  Also, if your tenant has no money and no \u00ab\u00a0skin in the game\u00a0\u00bb why should you do all the work?  You\u2019re the one taking a lot of risk.  Ask for personal guarantee as you\u2019re spending money.\n\nAnd this may all depend on your local rental market.  If there is little demand and your space has been vacant for years, you may have to be more flexible than in a landlord\u2019s market.", "replies": [{"id": "iocj5ed", "text": "Thanks for the advice. The building has. Even vacant for some time (probably a couple years) and we purchased it a few months back. So their is definitely some vacancy, but I'm not sure the previous owners were looking to lease it. \n\nThanks again!", "replies": [{"id": "iocrs15", "text": "No problem.  \nLast comments, it depends how badly you want to lease it.  Someone who requires less work may come along next week..\nAnd giving more free rent can be a substitute for landlord work if you don\u2019t want the headaches of work.", "replies": [], "depth": 3}], "depth": 2}, {"id": "iocp73t", "text": "Looks helpful and real world. Vote this up. Thanks for the read.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iocp2q6", "text": "C'mon retail/other knowledgeable experts, love to have some knowledge about this.", "replies": [], "depth": 1}, {"id": "iodvesz", "text": "OP, CRE broker here. There are a few ways you can tackle this and I\u2019ve done deals that reflect each of these scenarios. But first there are a few questions that need to be asked. \n\n1) what type of space is it? Retail, office, mixed use ect? \n\n2) What\u2019s their intended use? And will they be able to obtain an occupancy permit for the space?\n\n3) what is the credit worthiness of the tenant? Are they a local nail salon, pizza joint, attorney office, medical tenant, plumber?\n\n4) Will the improvements be able to be reused by another tenant or is it highly specialized?\n\n5) what\u2019s the length of the term of the lease?\n\n6) Who is going to be in charge of actually managing the TI project?\n\n7) What are your long term plans with the property?\n\n\nThere are many other questions that determine how much TI you provide but those are the big ones to start with. \n\nA few scenarios you can consider:\n\n- a flat TI allowance, aka $5,000 is all they get towards improvements and the tenant is responsible for charges above that limit. \n\n- you provide the TI and amortize it across the length of the lease and you charge a premium interest for essentially playing the \u201clender\u201d in this scenario. This would be added on top of the base rental amount plus the interest. \n\n- You could offer TI to attract a tenant and offer it as an incentive to lease up the vacancy in your property\n\n- you could provide TI on a \u201cper square foot\u201d basis aka You\u2019ll provide $3/psf but it\u2019ll be added on top of the rent. \n\n\nIn every scenario you need to protect yourself as the landlord. You do not want to put out a lot of cash with a high risk of that tenant vacating or defaulting. \n\nI highly recommend you manage the construction project. Have a few contractors come out for quotes. You do not want to have unsophisticated tenants trying to manage a project and run their business at the same time. \n\nTI allowance should consider: \n- what changes need to be done to the property\n- the length of the lease\n- creditworthiness of the tenant \n- does the TI and tenant support your long term plan for the property", "replies": [{"id": "iodvfpf", "text": "\nHello! You have made the mistake of writing \"ect\" instead of \"etc.\"\n\n\"Ect\" is a common misspelling of \"etc,\" an abbreviated form of the Latin phrase \"et cetera.\" Other abbreviated forms are **etc.**, **&amp;c.**, **&amp;c**, and **et cet.** The Latin translates as \"et\" to \"and\" + \"cetera\" to \"the rest;\" a literal translation to \"and the rest\" is the easiest way to remember how to use the phrase. \n\n[Check out the wikipedia entry if you want to learn more.](https://en.wikipedia.org/wiki/Et_cetera)\n\n^(I am a bot, and this action was performed automatically. Comments with a score less than zero will be automatically removed. If I commented on your post and you don't like it, reply with \"!delete\" and I will remove the post, regardless of score. Message me for bug reports.)", "replies": [], "depth": 2}, {"id": "iomtqrt", "text": "Thanks for responding...\n\nMedical space and the purposed use would be similar. \n\nI havent seen their financials yet, but they have a dozen locations throughout the state they currently operate out of. \n\nI think if the use remains similar, then we would ok with future tenants. Would still require some TIs but  shouldn't be much. \n\nI'm going to offer two options, 5 and 10 years (with rent escalators).\n\nFrom what I've read/chatted about its best to let them handle the TIs. I'll provide thesm some Floorplans and they can make changes as needed. \n\nIdeally I would like to keep it rented and then maybe sell it a few years down the road which would let me realize some gains. \n\nThanks again.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iofkahx", "text": "Definitely bake it into Base Rent if you plan to sell. TI and Work Letters are very important. \n\nTwo additional questions: who is performing the work (T or LL)?\nWho is paying for it, whether initial cost and reimbursement (T or LL)?", "replies": [{"id": "iomt79m", "text": "Thanks. From what I've read or talked with people about, the tenant will make the improvements and worst case I'll reimburse via rent concessions and ir some cash.", "replies": [], "depth": 2}], "depth": 1}]