What Does “Turnkey” Mean?

Many landlords promise prospective tenants a “turnkey” buildout, meaning the tenant will show up on the date its lease commences, “turn the key” and walk into finished space.  The landlord determines the costs it is willing to incur for this turnkey buildout based on the rental rate and term length, however,  the actual dollar amount of that turnkey buildout is seldom disclosed to the tenant.

A problem arises when the draft lease stipulates a turnkey buildout and references nothing more than a simple test fit drawing indicating where offices, doors, kitchens, and conference rooms are located. The tenant may be expecting glass-walled offices, a kitchen with upper and lower cabinets and appliances, hardwood floors, and high end lighting.  The landlord may deliver sheetrock office walls, rolled carpet, fluorescent lighting, and a bare bones kitchen with holes where the refrigerator and microwave the tenant is expected to buy will go.

Also, there will usually be insufficient teledata and electrical outlets.

It is crucial that tenant advisors walk their clients through the process of  defining turnkey prior to lease execution.  It is also in the landlord’s best interest as it ensures that everyone is on the same page and there is no mid-construction conflict.

What do we need to address to define Turnkey?

Walls and Doors

Identify where walls will be located and whether or not those walls go all the way to the deck.  (Note, walls built to the deck provide much better sound insulation but also cost more to build.)  Define the locations of doors, sidelites, and glass.  Stipulate the door heights.

Lighting

Ask where the lighting is going to be located and what type of lighting will be installed.  Will it be energy efficient such that it will turn off when there is no one occupying the space?

Kitchens

Will there be a kitchen?  Will have it plumbing so that you can draw water from a faucet?  (Trust me: wash your coffee pot in one of the building’s bathroom sinks for a day or two and you will understand the importance of a kitchen sink and faucet!)  Will there be upper and lower cabinets?  What is the counter material?  Will the landlord provide appliances?

Flooring

What will the flooring be throughout the space?  If you are going to have carpeted areas, is the carpet going to be carpet tiles (MUCH easier to replace worn areas in the future) or rolled carpet?  If you are going to have concrete floors, will they be stained?  Finished?  What is the kitchen flooring?

Baseboards and Molding

Will the space have rubber base or wooden baseboards?  Will the offices (or even just the conference rooms) have crown molding?

Outlets

Where are your electrical outlets and how many will there be in each office?  Will the landlord install teledata outlets and just let the tenant’s contractor pull the actual cable?

System Upgrades

If the space is second generation and any building systems need to be updated, will that be done and will landlord bear those costs?

Furniture Move Costs

If you already occupy the space and the landlord is promising to provide new carpet and paint “turnkey,” does the landlord plan to cover the cost of moving the existing furniture to allow the work to proceed?  Will the landlord cover the cost of that work happening during non-business hours, i.e. when landlord’s labor costs are higher?

Is All of This Really THAT Important?

Yes.  Absolutely.

First, read this discussion of the five interior finishes that make a Class A build-out Class A.

These things matter.  Sound proofing matters.  And cost differentials are big.

Nobody like surprises.  If you take the time to define turnkey ahead of construction, everyone knows what to expect and nobody gets an unexpected bill.