Restoration costs are unavoidable when moving out of a leased office or retail space. If you negotiate for a discount without a clear strategy, you may end up increasing the total cost. This article explains how to approach negotiations and cost reduction in a practical way.
Why can negotiating down restoration costs sometimes backfire?
Restoration means returning the property, at move-out, to the condition it was in when the lease was signed. Unlike residential properties, offices and stores typically involve a broader scope of work and higher costs.
Reasons careless price negotiations can be counterproductive:
- Because the final cost varies depending on wear and tear and the applicable scope of work, it is often difficult to fix an accurate amount during the negotiation stage
- In the rush to cut costs, necessary work may be overlooked, creating a risk of additional work being added later
- If negotiations drag on, there is a possibility that the schedule will no longer fit the move-out date
What is needed to reduce restoration costs appropriately?
Understand the price range
General restoration cost benchmarks by scale:
- Small scale: about JPY 20,000 to 30,000 per tsubo
- Medium scale: about JPY 30,000 to 50,000 per tsubo
- Large scale: JPY 50,000 or more per tsubo
Because quoted amounts can differ significantly from one contractor to another, it is important to obtain comparison quotes from multiple companies.
Review the lease agreement and quotation
Before any work begins, carefully review the lease agreement and quotation to confirm that there are no unnecessary works or charges you do not recognize. Once work has started, revisions become difficult.
Allow enough time in the schedule
If price negotiations take too long, there is a risk that the work will not be completed before the move-out date. Build your schedule in advance and proceed with negotiations accordingly.
Leave negotiations to professionals
Matters involving money can sometimes damage the relationship with the property owner. By outsourcing the assessment and negotiations to specialists, you can expect a smoother resolution and better cost control.
What is the option of leaving as a fitted space?
A fitted property is one where the previous tenant's interior finishes, equipment, and furniture are handed over as they are. Leaving as a fitted space means moving out while leaving the interior finishes and equipment in place.
Advantages of leaving as a fitted space
- Full strip-out work may become unnecessary, which can significantly reduce restoration costs (and in some cases reduce them to zero)
- Disposal costs and operational effort can be reduced
Points to note when leaving as a fitted space
- The owner's approval is essential (it cannot be done without consent)
- You need to find a successor tenant before the move-out date
- If the layout is highly unusual, there is a risk that no successor tenant will be found, in which case you will need to switch back to standard restoration work
Related reading
Frequently Asked Questions (FAQ)
Q. To what extent is the tenant responsible for restoration costs?
Unlike residential leases, in offices and stores it is common for the tenant to bear almost all restoration costs depending on the lease terms. Check the special provisions in the lease agreement in advance.
Q. How do you find a successor tenant for a fitted-space move-out?
It is effective to ask a real estate company for support or list the property on a portal site specializing in fitted properties. If you start searching before giving notice of move-out, you will have more time.
Q. If I moved into a skeleton property, do I always have to return it in skeleton condition?
If that is clearly stated in the lease agreement, that is generally the rule. Unless there is an exceptional separate agreement, the property must be returned in skeleton condition.
Q. What should I watch for when obtaining quotes from multiple companies?
It is important to compare them based on the same specifications and scope of work. Review the quotation breakdown carefully, and if any cost item is unclear, ask the contractor to explain it.
