What is the difference between a base building and turnkey industrial lease?

What is the difference between a base building and turnkey industrial lease?

The distinction between a base building and turnkey delivery is one of the most important deal structure decisions in any GTA industrial lease transaction, particularly in new construction or heavily renovated spaces. In a base building lease, the landlord delivers the premises in a defined base condition — typically a shell with concrete floor, structural columns, roof, exterior walls, base electrical service to the panel, and basic plumbing rough-ins. The tenant is then responsible for completing all improvements required to make the space functional for their operations: office buildout, racking infrastructure, electrical upgrades, HVAC units, dock equipment, and any specialized systems. The landlord typically provides a tenant improvement (TI) allowance — a fixed dollar amount per square foot — to offset these costs. In the GTA industrial market, TI allowances for new leases in 2026 commonly range from $15 to $40 per square foot depending on the landlord, the lease term, and the nature of the work. In a turnkey lease, the landlord agrees to construct or fit out the premises to a mutually agreed specification and deliver the space ready for the tenant to move in and operate. The landlord manages and finances the construction, and the tenant pays a base rent that reflects the landlord's capital investment in the buildout. Turnkey leases are more common in build-to-suit industrial transactions and in new construction where the landlord is willing to customize the building to the tenant's requirements in exchange for a longer lease term commitment. From a tenant's perspective, the base building structure gives more control over the construction quality and specifications, since the tenant manages their own contractors and buildout process. The tradeoff is construction risk — cost overruns, delays, and contractor management fall on the tenant. The turnkey structure reduces tenant construction burden but gives less control over the finished product and typically results in a higher base rent that amortizes the landlord's buildout cost over the lease term. Key questions to resolve in either structure: What exactly is included in base building delivery? What is the TI allowance and what restrictions apply to its use? Who controls the construction and selection of contractors? What happens to tenant improvements at lease expiry — does the tenant have to restore the space? These points should all be addressed clearly in the LOI and lease. Michael Law advises GTA industrial tenants on base building versus turnkey deal structure, TI allowance negotiation, and new construction lease transactions across the 905 corridor. Contact Michael at mlaw@lennard.com or (905) 917-2045.