By the end of the 1980s, almost half of the office buildingsthat existed at that time were constructed during the previous tenyears. When leasing space in new office buildings, it waseasy for tenants to understand that they would not likelyexperience significant pass-throughs of capital expenditures. Why? Because the majority of those buildings were new,and even in a poorly conceived or constructed building, atenant had a reasonable expectation that at least for thefirst few year of its lease term, substantial capital improvementswould not be required.

Another interesting trait of the 1980s was that every thirddentist became a real estate developer over night. And, manyof us have heard of those stories where buildings were sohorribly constructed that they immediately started falling downaround their tenants. Thank you cheap money and speculativeconstruction!

Those shiny new office buildings had brand new elevators,HVAC systems, electrical and safety systems, facades and parkinglots. Their tenants, not expecting to bear the financialburden of major capital improvements, negotiated their leasesby restricting their landlords from passing through suchcosts. Landlords, who also recognized that theirbuildings would not likely require immediate capital re-investment,most often agreed to such restrictions.