Calculate tenant improvement budgets and total build-out costs. Understand how TI allowances affect your lease economics and landlord investment.
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How tenant improvement dollars work in commercial leasing.
A TI (Tenant Improvement) allowance is the dollar amount per square foot a landlord contributes toward customizing a commercial space for a new tenant. The landlord typically amortizes this cost into the rent over the lease term. Higher TI = higher rent, but a better-fitted space.
The allowance depends on the space’s existing condition, the market, the building class, the lease length and your credit, so there is no single typical figure. Build-out cost is easier to benchmark for office: Cushman & Wakefield’s Office Fit Out Cost Guide 2026 puts the hard cost of a full office fit-out at $108–$219 per square foot across 40 U.S. cities. Use your contractor’s bid as the build-out cost above.
TI allowance: landlord gives you a budget, you manage construction. Turn-key: landlord builds to your specs. As-is: no improvements, lowest rent. TI gives the most control over quality and design. Turn-key is simplest but you may not control costs.
Longer lease = more TI leverage. Landlords recover TI over the lease term, so a longer lease generally commands a higher allowance. Credit-worthy tenants get better TI packages. In soft markets, TI allowances increase as landlords compete for tenants.
Allowances and costs vary by market, so enter real quotes in the calculator. These are the items that move the number.
| Space Type | Typical Scope | Notes |
|---|---|---|
| Office (2nd Gen) | Paint, carpet, minor walls and electrical | Existing improvements reused — the lowest-cost office case |
| Office (New/Shell) | Walls, HVAC distribution, ceilings, lighting, cabling | Full fit-out; hard cost $108–$219/SF across 40 U.S. cities (Cushman & Wakefield, 2026) |
| Medical/Dental | Exam rooms, plumbing, specialty HVAC, shielding | Plumbing and equipment push cost above standard office |
| Retail | Flooring, fixtures, lighting, signage | Varies widely by concept |
| Restaurant | Kitchen, hood and exhaust, grease trap, walk-in | Kitchen, exhaust and plumbing add the most scope |
| Industrial | Docks, mezzanine, power upgrades | Often minimal improvements needed |
Every calculator we offer, in one place — run the next number your lender will ask about.
Common questions about tenant improvements.
It depends on the market, the building class, the lease term and the space’s condition. Second-generation office space (existing improvements) needs less work, so allowances are lower than for shell space that needs a full build-out. For a benchmark on the cost side, Cushman & Wakefield’s Office Fit Out Cost Guide 2026 puts a full office fit-out at $108–$219 per square foot in hard costs across 40 U.S. cities. Ask what recent leases in the building received, and compare the allowance with your contractor’s bid.
The tenant pays any costs above the landlord's TI allowance out of pocket. This is called the "tenant out-of-pocket" or "above standard" cost. Some landlords offer to finance the overage and amortize it into rent, essentially making it a loan.
Landlords recover TI through your rent. A $50/SF TI on 3,000 SF = $150,000. Spread over a 5-year lease (60 months) with no interest, as this calculator shows it, that is $2,500 a month. A landlord that funds TI may also charge interest on it: at an assumed 8%, the same $150,000 over 60 months is about $3,041 a month (loan payment formula of our commercial mortgage calculator). Longer leases spread the cost over more months and lower the monthly amount.
Yes. Leverage includes: longer lease commitment, strong business credit, competing offers from other buildings, soft market conditions, and willingness to accept higher base rent. In strong markets, TI is less negotiable.
It depends. If you need significant improvements, TI is valuable because it provides capital you might not have. If the space works as-is, negotiating lower base rent may save more over the lease term. Run both scenarios to compare.
It can be. An SBA 504 loan lets an owner-occupant buy with 10% down (15% for a business two years old or less or a special-purpose building, 20% if both), and the buildout can be part of the project cost. Owning removes TI negotiations, builds equity, and provides depreciation, but it ties up cash and you carry the building’s costs. Our advisors model buy-vs-lease for free to help you decide.
Whether leasing with TI or buying your own building, our advisors help you make the right real estate decision.
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