Leasing a raw (or “shell”) commercial space gives you the opportunity to design your business from the ground up—but it can also introduce unexpected costs that can quickly push you over budget if you’re not prepared.
At JR Mercantile Real Estate Advisors Inc., we regularly guide tenants through the build-out process and help them anticipate expenses beyond the obvious. Here are some of the most common hidden costs to keep in mind:
1. Permits and Approvals
- What’s Often Missed: Building, electrical, plumbing, and development permits can add up quickly—especially if your business use requires special zoning or additional inspections.
- Pro Tip: Build extra time and budget into your project plan to account for permit applications and potential delays.
2. Upgrading Base Building Systems
- What’s Often Missed: HVAC, electrical capacity, or water lines may not be sufficient for your operations. Upgrades can be expensive and aren’t always covered by the landlord.
- Pro Tip: Have a contractor assess these systems before signing your lease so you understand what’s included and what you’ll need to fund.
3. Bringing the Space to Code
- What’s Often Missed: Compliance with current building codes, fire safety regulations, or accessibility standards (like barrier-free washrooms) may require more work than anticipated.
- Pro Tip: Don’t assume “new” means “code-compliant” for your specific business use—requirements vary by industry.
4. Professional Fees
- What’s Often Missed: Architect, engineer, and designer fees are essential for planning and executing your build-out, and they can account for a significant portion of the budget.
- Pro Tip: Get quotes early and factor these into your total project cost—not just construction expenses.
5. Temporary Business Disruption
- What’s Often Missed: If your move-in is delayed, you may incur additional rent at your current location or lose revenue waiting for the new space to be ready.
- Pro Tip: Negotiate free rent or reduced rent during the construction period to offset delays.
6. Fixtures, Furniture & Equipment (FF&E)
- What’s Often Missed: Items like signage, display shelving, security systems, and POS equipment are rarely included in the construction budget.
- Pro Tip: Make a complete list of operational needs beyond walls and flooring—these costs can be substantial.
7. Contingency for Unforeseen Issues
- What’s Often Missed: Construction projects rarely go exactly as planned. Hidden structural issues, material price increases, or supply chain delays can all add costs.
- Pro Tip: Allocate at least 10–15% of your budget for contingencies.
The Bottom Line
Building out a raw space offers complete customization, but without careful planning, the “extras” can quickly outpace your budget.
At JR Mercantile Real Estate Advisors Inc., we work with trusted contractors, designers, and engineers to help clients plan realistic budgets, negotiate tenant improvement allowances, and avoid costly surprises—so your business launch is as smooth as possible.
Considering a raw space for your next location? Let’s talk about what’s really involved before you sign on the dotted line.
