Tenants: Make Sure Your TIs Cover This New Standard

WASHINGTON, DC—At the beginning of July 2015 new mandatory IECC and ASHRAE 90.1 standards for lighting switches and lighting fixtures were released.

The standard slipped into the market virtually unnoticed, which is surprising given the effect it could have on certain buildings and their tenants, says Robert Hartley, director of Research for Colliers International.

As he writes in a blog post and an alert on the subject:

"Under the new standards, if an improvement to a space requires 10% or more of the lighting fixtures to be changed, then all the fixtures within the space may need to be replaced. More importantly, three-lamp T8 fixtures are no longer acceptable. Therefore, more energy efficient fixtures are required to meet the new watts-per-square-foot requirements."

The standard itself is very clear about what is required under what circumstances -- and we will look more at that in a moment.

What is unclear, Hartley tells GlobeSt.com, is who will pay for these changes. It could fall to either the landlord or the tenant.

"It will be very interesting to see how tenants and landlords work this out," he says. Much of the negotiation and wrangling will be behind-the-scenes but it could morph into public ranting if one party is caught unaware. That party is most likely to be the tenant, which, unlike a typical landlord, does not have an engineering department or lobbying group to keep it up to date on these changes.

The problem will be the changes will be financed in the TIs, Hartley explained. "It will come down to either landlords increasing the TIs to include the costs of making these changes or tenants having to make pay for these changes within the current level of TIs."

Or, possibly, the landlord can provide a higher IT and then increase the rents. But, as Hartely pointed out, tenants might balk at higher rents if this fix is something they view the landlord as being responsible for.

This is no small additional cost as the changes could add as much as 20% to 25% to a typical build out, Hartley says.

Here's his back-of-the-envelop math for that scenario.

Each light fixture's total cost is $350 and there are two light fixtures every 100 feet. That translates into roughly $3.50 per square foot. Then add $2 in costs for sensors and daylight switches, bring the total cost to $5.50 per square foot.

Other variables include what fixtures are already in place, whether LED lighting will be used or a lower cost alternative and the distance required for electrical runs. The tenants that are completely unaware of the standard and its associated costs are the ones most likely to be unpleasantly surprised, Hartley says. They will negotiate a TI package and then secure a general contractor for the build out. The tenant will get schooled in these developments only when the general contractor applies for a permit and adds up the costs.