How Rising Twin Cities Buildout Costs Are Impacting Today’s Space Leasing Strategies
By Chris Rohrer, Broker & Pete Kostroski, Broker | Rokos Advisors
Today’s Twin Cities commercial tenants are facing a real shift: construction costs are higher than ever, and that reality needs to factor into your leasing strategy, especially when it comes to how long of a lease term you’re committing to.
Construction Costs Are Reshaping the Economics of Leasing
Over the past few years, construction and buildout costs have surged across nearly every asset class. Between labor shortages, supply chain constraints, and inflation on materials like glass, steel, and drywall, the price tag on tenant improvements has skyrocketed.
Where a typical mid-level office buildout may have once cost $60–$70 per square foot, we’re now routinely seeing numbers closer to $100–$120+ per square foot and sometimes more for complex or highly customized spaces.
Landlords often provide tenant improvement (TI) allowances as lease incentive; however, those allowances rarely cover the full cost of a buildout unless you commit to a 7-to-10-year lease term. This means tenants are often faced with making a very long-term commitment to space without being able to predict how their needs will change over that length of time or become increasingly responsible for out-of-pocket costs to get the space built out the way that they require.
What Tenants Should Be Paying Attention To
If you’re planning to lease new space or renovate existing space in the next 12-24 months, here are a few key considerations:
Get clear on Buildout Costs Early
Before you negotiate lease terms, understand what the desired improvements will cost in today’s market. A detailed space plan and contractor estimate can make all the difference when evaluating your options.
Push for Flexibility Within Longer Terms
A 10-year lease doesn’t have to mean being locked in. Many tenants are negotiating early termination rights, contraction options, or sublease clauses to retain adaptability while still benefiting from a longer term.
Model the Full Cost Picture
Work with your advisor to understand the total economic package—not just base rent, but TI allowances, rent abatement, escalations, and your own out-of-pocket costs. This allows you to evaluate multiple space options on a truly apples-to-apples basis.
Consider Second Generation Spaces
Look at spaces where you can take advantage of some existing elements of the spaces you consider. Reusing elements from prior buildouts can reduce overall costs and shorten your timeline.
Explore ‘Spec Suites’
Spec Suites are newly constructed spaces that building owners have built out to reasonable standards, allowing somewhat shorter terms for what would typically require a longer term.
As construction costs rise, so do the risks of committing to a space that may not fit your needs in 5-10 years. This is where tenant representation really matters. At Rokos Advisors, we work with our clients to make sure every lease term—from rent to renewal options to TI packages—is aligned with both short-term needs and long-term goals.
Curious to discover the lease length the best fits your space needs and financial goals? Connect with Rokos Advisors today—let’s build a strategy that works for your business.
Rokos Advisors is an award-winning Minneapolis - St. Paul based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.