🇺🇸United States

Scope Creep and Budget Overruns in Tenant Buildouts

1 verified sources

Definition

Tenant improvement projects frequently experience scope creep where requirements expand beyond original agreements, leading to unauthorized changes and cost increases. Without proper change management procedures, these expansions cause budget overruns. Permit delays, material delivery issues, and hidden construction conditions further exacerbate financial impacts.

Key Findings

  • Financial Impact: Not quantified in $ per period; industry guidance indicates recurring overruns without mitigation
  • Frequency: Per project - recurring across multiple projects
  • Root Cause: Lack of formal change order procedures, poor initial planning, and inadequate risk management

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Leasing Non-residential Real Estate.

Affected Stakeholders

Project Managers, General Contractors, Tenants, Landlords

Deep Analysis (Premium)

Financial Impact

$10,000-$50,000+ per project in compliance-driven changes; project delays = potential fines ($100-$300/day non-compliance); staff redeployment costs • $100,000-$500,000 per buildout (infrastructure over-specification due to late requests; redundant systems installed 'just in case'); delayed move-in = lost productivity and cloud revenue • $12,000-$40,000 per project in untracked changes; occupancy delays = $1,000-$5,000/week revenue loss for tenant (typical 3-6 week delays)

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Current Workarounds

AR Specialist cross-references invoices against government procurement request documents; creates detailed reconciliation spreadsheets; flags variance for Contracting Officer review; ensures compliance with Federal Acquisition Regulation (FAR); 20-30 hours manual audit per buildout • AR Specialist cross-references invoices against Slack messages from project lead, Google Drive budget sheets, and email confirmations; creates manual audit trail; uses Airtable or Sheets to flag 'questionable' line items; requests receipts and justifications from GC • AR Specialist manually reconciles invoices against original contract; creates pivot tables to track change orders; forwards emails between GC and project manager to document changes; flags disputed amounts for write-off or negotiation; calls contractors to verify scope

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Permit Delays and Material Delivery Bottlenecks

Not quantified in $ per period; described as significant timeline impacts

Inadequate Quality Control Leading to Rework

Not quantified; rework costs embedded in standard project risks

Forfeited tenant improvement allowance due to poor tracking

Common TIAs range from $10–$50 per square foot; for a 10,000 sq ft space this is $100,000–$500,000 of which a material share can be forfeited if deadlines or documentation are missed.[1][6][10]

Uncollected or delayed TIA reimbursements from landlords

Individual TI receivables often run into hundreds of thousands of dollars per lease; missed or long‑delayed payments can leave six‑ or seven‑figure balances outstanding across a multi‑site tenant.[3][5]

Budget overruns on tenant improvements from weak TIA expense tracking

For a TIA of $30–$50 per square foot on a 10,000 sq ft space ($300,000–$500,000), overruns of 10–20% are common in construction projects, equating to $30,000–$100,000 per build‑out.[2][6][8]

Overpaying contractors due to inadequate invoice auditing

Overbilling in construction has been documented in industry studies at several percent of project value; on TI budgets of $100,000–$500,000 this can translate to $5,000–$50,000 per project in excess payments.[8]

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