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Make ready costs, also called turnover costs, are the expenses a property team incurs to prepare a vacated commercial space or unit for the next tenant. They cover cleaning, painting, flooring repair or replacement, repairs to fixtures and systems, re-keying, inspections, and minor build-out, returning the space to a clean, functional, and leasable condition between occupants.
What make ready costs mean
When a tenant moves out of a commercial space, the unit rarely returns to the market in show-ready condition. Carpet shows wear, walls carry scuffs and old paint colors, fixtures may be dated or damaged, and the prior tenant's locks and signage remain. Make ready costs are the expenses required to close that gap: the cleaning, repairs, refresh, and light reconfiguration that bring the space back to a standard a prospective tenant expects to see on a tour.
The term applies across asset classes. In a multi-tenant office building, making a suite ready might mean fresh paint, cleaned or replaced carpet tile, ceiling tile repairs, and patching the demising walls where the prior tenant's cabling ran. In a retail center, it can include removing a departed tenant's fixtures, restoring the storefront, and confirming that building systems serving the space still function. In an industrial or flex property, it often centers on dock equipment, lighting, floor repair, and clearing the space of the prior occupant's racking. The common thread is that the work restores or refreshes an existing space rather than building something new for a specific tenant.
That distinction matters for accounting and planning. Make ready work is generally treated as an operating expense because it maintains a leasable asset in marketable condition. It contrasts with custom build-out negotiated for an incoming tenant, which is typically handled separately. Understanding what belongs in the make ready bucket keeps budgets honest and helps owners compare turnover costs cleanly across a portfolio.
Why make ready costs matter in commercial real estate
Make ready costs sit at the intersection of two things every owner watches closely: vacancy and operating expense. The work happens during the gap between one tenant leaving and the next taking occupancy, so the speed and cost of turning a space directly shape how long it sits empty and how much it costs to fill.
The vacancy dimension is often the larger financial story. Every week a space waits for make ready work to finish is a week of lost rent. A turnover that drags from cleaning delays, slow vendor scheduling, or surprises discovered after move-out extends downtime and pushes back the day rent resumes. A turnover that is planned in advance, scoped accurately, and executed quickly returns the space to leasable condition sooner, which shortens the vacancy window and restores income faster.
The expense dimension is more direct. Make ready spending reduces net operating income in the period it occurs, so it shows up plainly in a building's financials. Because turnovers cluster around lease expirations, a year with several rollovers can concentrate make ready spend and pressure the budget. Owners and managers who forecast these costs by suite and by expected move-out date avoid being caught off guard, and they can stage work so cash outlays line up with the leasing calendar.
There is also a leasing and brand dimension. A space that shows well leases faster and often at a stronger rate, because prospective tenants form an impression in the first minutes of a tour. Clean, bright, well-maintained space signals a well-run building, while a tired or unfinished suite invites lower offers and longer negotiations. In this sense make ready costs are not only a maintenance line; they are an investment in how quickly and how profitably space gets leased.
Key takeaways
- Make ready costs are the expenses to return a vacated space to a clean, functional, leasable condition for the next tenant.
- They differ from tenant improvements: make ready refreshes a space and is usually an operating expense, while tenant improvements are custom build-out that is typically capitalized.
- Because they occur during turnover, make ready costs shape both vacancy downtime and net operating income, so planning and tracking them protects income and budgets.
Components of make ready costs
Make ready scopes vary by property and by the condition the prior tenant left behind, but most turnovers draw on a recognizable set of work categories.
Cleaning and refresh
Nearly every turnover starts with a deep clean: floors, windows, restrooms, kitchens or break areas, and the removal of any debris or items the prior tenant left behind. Refresh work usually includes repainting in a neutral, market-ready color and may extend to cleaning or replacing window coverings so the space presents well on a tour.
Flooring and surfaces
Flooring is one of the most visible and frequently addressed items. Worn carpet may be cleaned, patched, or fully replaced, hard flooring may be refinished, and damaged ceiling tiles are swapped out. These surfaces drive much of a prospect's first impression, so they often carry a meaningful share of the budget.
Repairs to fixtures and systems
Make ready work includes restoring fixtures and confirming that building systems serving the space function correctly. That can mean repairing or replacing light fixtures, plumbing fixtures, and hardware, plus checking that HVAC, electrical, and life-safety elements in the space are in working order before a new tenant arrives.
Minor build-out and demising
Light reconfiguration frequently falls under make ready, such as patching demising walls, removing a prior tenant's low-value fixtures, or restoring a space to a standard shell or suite layout. More extensive, custom construction for a specific incoming tenant is generally handled as tenant improvements rather than make ready.
Re-keying and inspections
Security and compliance close out the scope. Locks are re-keyed or access credentials reset so the prior tenant no longer holds entry, signage is removed or updated, and inspections confirm the space meets code and the building's standards. A documented move-out and make ready inspection also establishes the condition the next tenant receives.
Budgeting and tracking make ready costs
Because make ready spend is recurring and tied to the leasing calendar, the teams that manage it well treat it as a planned, trackable category rather than a series of one-off surprises. A disciplined approach typically rests on a few practices:
- Budget per suite or unit. Estimate make ready cost for each space based on its size, condition, and finish standard, then roll those estimates up against the schedule of expected lease expirations so the portfolio forecast reflects real turnover timing.
- Track actual cost per turnover. Record what each turnover actually costs by space and by work category, so future estimates improve and outliers, such as a suite that repeatedly needs heavy work, become visible.
- Tie spend to vacancy timing. Sequence make ready work to minimize downtime, starting scopes promptly after move-out and ordering long-lead materials early so the space reaches leasable condition without avoidable delay.
- Document move-out condition. Use move-out inspections to separate normal wear from tenant-caused damage, which supports recovery from security deposits or restoration clauses and keeps the owner from absorbing costs that belong to the departing tenant.
- Standardize scopes and finishes. Define a consistent make ready standard and finish palette so vendors price work predictably and so spaces across the portfolio present a consistent, market-ready look.
Make ready cost breakdown
The table below outlines common make ready work categories and what each typically covers. Actual scope and relative weight vary by property type, space size, and the condition the prior tenant left behind.
| Work category | What it typically covers |
|---|---|
| Cleaning and debris removal | Deep cleaning of floors, glass, restrooms, and break areas, plus clearing any items left by the prior tenant. |
| Painting and refresh | Repainting in a neutral, market-ready color and refreshing window coverings so the space shows well. |
| Flooring | Cleaning, patching, refinishing, or replacing carpet and hard surfaces, and swapping damaged ceiling tiles. |
| Fixtures and systems | Repairing or replacing lighting, plumbing fixtures, and hardware, and confirming HVAC and life-safety elements work. |
| Minor build-out and demising | Patching walls, removing prior fixtures, and restoring the space to a standard suite or shell layout. |
| Re-keying and inspections | Re-keying locks or resetting access, updating signage, and inspecting the space against code and building standards. |
Best practices
Teams that control make ready costs without sacrificing quality tend to share a handful of habits. They start with preventive maintenance during occupancy, because a space kept in good condition throughout a lease needs far less work at turnover than one allowed to decline. They schedule a thorough move-out inspection the moment a tenant gives notice, so the full scope is known before the keys come back and there are no costly surprises after the space is empty.
They also plan the turnover as a sequence rather than a scramble. Long-lead items such as flooring or specialty fixtures are ordered early, vendors are lined up before the space is vacant, and the work is staged so trades do not wait on one another. That sequencing is what compresses downtime and keeps the vacancy window short.
Finally, strong teams treat make ready data as a management tool. They standardize scopes and finishes so pricing is predictable, they document tenant-caused damage to recover what is owed, and they review actual cost per turnover across the portfolio to spot the spaces and vendors that need attention. Over time that review sharpens budgets and keeps turnover spend both predictable and defensible to ownership.
Frequently asked questions
What are make ready costs in commercial real estate?
Make ready costs are the expenses a property team incurs to prepare a vacated space or unit for the next tenant. Typical items include cleaning, painting, flooring repair or replacement, fixing or servicing fixtures and building systems, re-keying locks, inspections, and minor build-out such as patching demising walls. The goal is to return the space to a clean, functional, leasable condition.
What is the difference between make ready costs and tenant improvements?
Make ready costs restore or refresh a space to a standard, leasable condition and are usually treated as an operating expense. Tenant improvements are custom build-out negotiated for a specific tenant, such as new walls, finishes, or specialized systems, and are typically capitalized and amortized over the lease term. Make ready prepares the space for the market; tenant improvements tailor it to one occupant.
How do make ready costs affect vacancy and net operating income?
Make ready work happens during the gap between one tenant leaving and the next moving in, so a slow turnover extends downtime and lost rent. The work itself is a direct expense that reduces net operating income in the period it occurs. Faster, well-planned turnovers shorten vacancy, restore rent sooner, and keep make ready spend predictable.
How can property teams control make ready costs?
Teams control make ready costs through preventive maintenance that keeps spaces in good condition, thorough move-out inspections that document tenant-caused damage for recovery, standardized scopes and finishes that simplify pricing, reliable vendor relationships, and tracking actual cost per turnover so budgets stay accurate over time.