In previous blogs, we have looked at making an application for landlord's consent to carry out works during the term which can be viewed here, and here. In this blog we are looking at what options are available to an occupier when agreeing terms on new space and we will look at the meaning of the commonly used terms to describe fit out.
Traditionally, an occupier would have agreed that the landlord will deliver space with either a Category A (Cat A) or a Category B (Cat B) fit-out.
A Cat A fit-out commonly includes basic mechanical and electrical (M & E) services; raised floors, suspended ceilings and internal surface finishes; and fire safety (i.e. detectors / alarms). The occupier would then need to carry out their own personalised fit-out. If the space is within an existing building, a refurbishment of any common areas may also be expected. This type of fit-out suits occupiers looking for a space to make their own or who already have furniture or other specific items that they wish to install or to utilise from an existing space.
A Cat B fit-out, starts from the Cat A base referred to above, and incorporates a fully personalised and furbished tenant fit-out, including for example, kitchen, bespoke meeting room facilities, office furniture, IT infrastructure and branding. This creates a space which is ready for immediate occupation and gives the occupier input into the planning and designing of the space to ensure it is suitable for all of their requirements.
An increasingly popular option being offered is Cat A+ fit-out which is a hybrid between the Cat A and Cat B options. A Cat A+ fit-out provides a more generic space ready for immediate occupation by a tenant (it is often referred to as "plug and play" space. In a property with a Cat A+ fit-out, a tenant may typically expect fitted kitchens and toilets; partitioning / meeting room spaces; IT infrastructure; office furniture; and full M & E to be in place. While there are similarities with a Cat B fit-out, in that a tenant could move in immediately with limited further investment being required this provides a more generic space for the tenant to operate from so may not be suitable where occupier requirements are more bespoke or heavy branding is required. It best suits tenants who do not have the additional time it will take to carry out additional fit out works before space can be occupied (perhaps driven by lease events elsewhere or expansion requirements) and do not want the hassle and drain on management time of having to procure a fit out (even if managed by a professional team).
Although an occupier will not incur initial fit-out costs for Cat A+ space, understandably, the commercial terms of the deal are likely to be different in terms of rent and incentives given that the landlord will have incurred and will need to recover the costs of delivering the space for the occupier.
Ultimately, the nature of the occupier's business, how they want to use the space, timings, appetite to manage fit out and whether they are a new or existing business will all feed into which approach will best suit each individual occupier.
Having looked at what types of fit-out are available to an occupier in this blog, we will take a look with our construction colleagues at what type of collateral warranties an occupier may be looking for when taking space in a new build / newly refurbished building in our next blog.
If you have any queries about this topic, or anything else related to real estate, please email Leonie Hall, Phil Hunter or your usual Brodies contact.
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