First time commercial lessee with a couple questions...
Apologies for the length. 

TL;DR: Cost to ready space for use is ~$14k. How can I use this to my advantage when negotiating the lease?

Context:

We've outgrown our lease-free light industrial space and have our sights on something that hits basically every mark on our list. Dialog with the owner has gone extremely well and we're closing in on a deal after three rounds of negotiation. On the table right now is $3250 plus 60-days rent free year 1, $4000 year 2, and $5000 year 3. 

As a newb there's a lot that I don't know about this game and I want to be sure that I don't make a critical misstep before signing the letter of intent. The owner is an old hand who has been developing commercial real estate since he came home from the Korean War in 1959. He and I have great rapport and no matter what I want him as a mentor. He owns the entire block and then some.

$3250 is about $2000 lower than anything else on the block. It's low because it's raw. I mean raw. Walls are a wreck. Hasn't been occupied in about 6 years. It was a small movie theatre for 35 years (comes with the screen, but the popcorn machine is kaput. deal breaker, I know). What makes it ideal for us is that it's just exactly the right degree of busted up. We categorically do not want a finished, snazzy space. We want a boutique factory that doubles as a retail speakeasy. This is it.

There's basically only one thing about the place that I want changed: the sloped floor. It's a plywood and 2x4 job with miscellaneous debris cached under the surface (bricks and mortar from holes someone punched in the exterior walls). I went in with a tape measure today and estimated 15 cubic yards of debris on the outside. Underneath is the original 12" plank wood floor from the mid 19th century. I've got no interest in refinishing it, just cleaning it and treating it with tung oil. If I did the whole project myself it would probably take me a week and a roll-off container rented for $390. My time is limited however, so it would be better to hire it out to a contractor friend at something like $15 / hr. This is priority number one to get the place set up for our operation (aside from moving and staging our equipment). 

So, all that said, here's what I'm thinking:

The additional $18k charged over years two and three is kind of steep. I'm talking about leaving it raw for now, but in later phases of the project we intend to improve &amp; preserve the space. They've told me that a quote on restoring the floor came in at $14k. Every other prospective tenant has wanted this done. 

If I were to do this work would I be doing them a $14k favor or is it considered build-out and therefore my responsibility? I have no idea what's customary in such a situation, or if there is even such a thing as "customary" in this business. 

$14k would be almost four months rent. Would it be insane for me to ask for four months rent free? Six?

The owner is very approachable and I would enjoy this opportunity to negotiate with him, but I don't want to offend him. I want him in my corner. 
[{"id": "cpzcqea", "text": "Lots of options, but it's all just negotiating. \n- Start with flat out asking for him to cover it. If it hasn't been leased in 6 years he should do this anyway.\n- If there's push back you can meet in the middle and each cover $7k. You already have 2 months free rent. I typically see a month free for each year of the lease, so you should get him to 3 easily. \n- Push your lease to a five years instead of three, with years 4 and 5 at $5000/mnth, and he covers all of the work. If it hasn't been leased in 6 years like you're saying you have a ton of leverage. In every lease you should ask for something. If you haven't then you're getting taken advantage of. \nJust my thoughts though...   ", "replies": [{"id": "cpzhlpw", "text": "Very helpful,  thank you. It's details like a free month for each year of the lease that I've never heard before. ", "replies": [{"id": "cpzk0nx", "text": "a few other thing you may want to consider is adding some options.  If you go to 5 years specifically, I'd ask for a 5 year renewal.  If you are putting lots into this building, and it needs lots, think about putting an option to purchase in.  Then in a few years if you want to dump a boatload of cash into it, you can and you know its protected since you can purchase it whenever you'd like or you can extend way out.  \n\nYou don't want to be in a situation where you've dumped money into this that is going to raise the rental value and cause you to eat a rental increase.\n\nAlso you said its about 2k lower than everything else due to condition.  How much does it cost to bring it to those properties condition?  Even if you don't plan to do it, this can help you assess the as is value.  You have really steep  increases, which is fine if its a concession to you because its a 4k space and you are getting a break the first year.  If its a 3k space though that scares me.  Is he expecting a renewal at 5k?  Typical annual increases are more like a couple-a few percent.\n\nLook at the maint clauses too.  Make sure you aren't getting fucked there.  Is this things mechanics and roof ok?  If there are issues are they yours or his?  How much do you have to spend before a replacement is needed and it becomes his issue?  \n\nThere are things you can negotiate and should that aren't necessarily the price.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cpzffuk", "text": "Have you talked to the city or an architect about this?  6 years is enough to lose a certificate of occupancy AND you sound like you have a change of use going on.  If there are any code issues they can make you fix them most places.  I'd check into that before signing anything.", "replies": [{"id": "cpzhk6c", "text": "Thanks!", "replies": [{"id": "cpzhwfc", "text": "Most building codes separate into these classes:\n\nhttp://en.wikipedia.org/wiki/Building_occupancy_classifications\n\nWhen you switch between them (or if your CO is revoked) you MAY have to have an architect draw up new plans that meet code per your classification on the space, and have these approved by whatever government entity does that for this building.  Then do whatever construction is needed for those plans.  After all that the fire department will be doing walk through as well.  \n\nIf you look up the code requirements for the class you fit in you can get a good idea before paying an architect for a feasibility analysis.  IE if the building isn't sprinklered and you require one, well that's a major item usually.  Bathrooms are the other one but probably less so for you since it sounds like you are going to a less intensive use.  \n\nWatch out for fire stuff.  Not enough exits?  etc etc, well they can make you fix it now.  Same for ADA stuff, they can require you spend x% of your rehab on that stuff.  \n\nNot trying to scare you, maybe its fine and your city is lax and you just fill out an app and call it a day.  Its one of those things sometimes people think 'oh yeah I just sign the lease and I'm done here' then find out there is like 100k+ of shit they didn't know about that has to happen before they can open for business.  So look into it.", "replies": [{"id": "cpzitph", "text": "Wonderful info, thank you. My partner and I have an architect friend who we've asked to come with us to scope it out - I wasn't even thinking about code when we asked him, so I'm very glad you brought that up. Of course he would have had an eye out, but now I'm a bit less of a dope ;)\n\nI actually have a drawing made in 2013 for a prospective tenant. It's marked \"Life Safety Plan.\" I don't see any major departures from the space as I've surveyed it, so hopefully that's a good sign. \n\nThe bathroom comment definitely got me thinking though. It must have had two bathrooms when it operated as a theatre, but apparently the situation is shared right now... I'll have to think more seriously about that. Thanks again for alerting me.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cpzl34b", "text": "I would ask him to do the floor.  Has to be done anyway.  Get a 5 yr year lease with with an option to renew for 5 more at market rates.  Get the ability to sublet or assign.  ", "replies": [{"id": "cpzuzcv", "text": "Thank you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "cqaz50q", "text": "ADA issues are typically the tenants responsibility as are mechanical systems; electricity, gas, HVAC, plumbing, windows, doors.  When the floor comes up whats the subfloor going to look like?  I'd be asking the owner to take care of it.  \nThe rate structure is pretty heavily weighted on the backend which is fine but as another poster pointed out I wouldn't want to make a big investment and then pay rent based on the investment I made.  An option to puchase would be ideal for you and right of first refusal slightly less.  If I was going to be making a big investment in a space I'd want long term security to get a return on that, with CPI based increases with no more than 5% caps.  But I dont know your market so I'm not really educated to say whether that is appropriate.  A six year vacant property would likely motivate a landlord and maybe he's ready to sell it.  \n\nGood luck!", "replies": [], "depth": 1}]