Let’s Talk: Tenant Improvement Allowance – There’s More to it than Dollars

Let’s Talk: Tenant Improvement Allowance – There’s More to it than Dollars

If you’re looking for office or industrial space, or planning to renovate the one you’re in, you’ve likely come across the term “tenant improvement allowance,” or TI allowance. What exactly is it, and how can you make the most of it?

A TI allowance is money that a landlord offers a tenant to help cover the cost of customizing or upgrading a leased space. It’s usually expressed as a dollar amount per rentable square foot (e.g., $50 per RSF) and is meant to support construction-related expenses like demolition, drywall, lighting, or finishes. A well-negotiated TI allowance—both the amount and language—can significantly offset the cost of creating a space that works for your team.

Many tenants don’t realize how negotiable the amount and the process for accessing it are, or how much strategy goes into using them effectively. Whether you’re signing a new lease or renewing an existing one, here’s what you need to know.

What’s Covered in a TI Allowance?

Generally, a TI allowance can be used for what’s known as “hard costs”, like walls, flooring, ceiling work, and electrical or HVAC modifications. It may also be used for select “soft costs,” such as architectural drawings or permitting.

Items that often fall out of the typical scope of TI allowance include furniture, fixtures, and equipment (FF&E), security systems, IT infrastructure and cabling, moving expenses, and project management fees.

Understanding what is and isn’t reimbursable helps you plan your full project budget and avoid surprises down the line.

How to Maximize Your TI Allowance

TI allowances aren’t just handed out in fixed amounts. With the right strategy, you can often negotiate for a larger package that better reflects your space needs and the value you bring as a tenant.

• Know your leverage. Landlords are often willing to offer more generous TI packages to secure long-term, creditworthy tenants, especially in markets with high vacancy.
• Understand the lease term impact. Longer leases typically justify higher TI contributions.
• Get estimates early. Knowing how much your buildout, relocation, and setup will cost helps determine what to ask for.

Engaging a real estate advisor early in the process can make a huge difference in how much you’re able to secure and how smoothly your project goes.

Consider Creative Uses of TI Funds

If you're moving into a second-generation space—one that's already built out and needs only minor tweaks—you may not need a full buildout budget. In these cases, it's sometimes possible to negotiate alternative uses of the TI allowance.

For example:

• Apply it as free rent or rent abatement
• Use it to upgrade building systems (like HVAC or lighting)
• Reallocate it toward move costs or other tenant-side expenses

A flexible approach can help you unlock even more value, especially if you work with a broker who understands what’s on the table.

Don’t Assume Your TI Will Cover Everything

A common misconception is that if you receive a TI allowance, your buildout will be “free.” But in many cases, tenants end up spending their own capital to supplement the landlord’s contribution.
That’s why it’s essential to:

• Work with a qualified project manager to develop a realistic budget
• Compare landlord TI contributions across properties
• Plan for out-of-pocket expenses, such as technology or FF&E

Even a generous TI allowance requires careful planning and oversight to deliver the results you want without surprise overages.

The Bottom Line

TI allowances are one of the most powerful, but often overlooked, tools tenants can use to shape a workplace that supports productivity, retention, and company culture. But to get the most out of them, you need to understand how they work, what they cover, and how to negotiate strategically.

At Cresa, we help tenants navigate these conversations every day, from structuring the deal to managing the buildout. Contact us to get the most value from your lease and the space that comes with it.