Tenant Improvement (TI) Allowance

Category: business

An agreement where a commercial landlord pays for a portion of the construction costs required to build out a tenant's space.

Expressed as a dollar amount per square foot, a TI allowance is a critical negotiating tool in commercial leasing. The funds are used to transform a raw "shell" space into a functioning office, medical facility, or retail shop. High TI allowances attract premium, long-term credit tenants but require the landlord to have significant upfront cash reserves.

Common Examples

• The landlord offered a forty-dollar per square foot tenant improvement allowance to offset our extensive build-out requirements for the new medical tech office.
• We closely track the tenant improvement allowance payout schedules within our construction project management database to prevent cost overruns.