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Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN &amp; buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>

How Much Should a Tenant Improvement (TI) Allowance Be Per Square Foot?

Direct Answer

Push for a TI allowance of $30 to $80 per square foot — and treat it as real, negotiable money, not a gift. For a basic office refresh (paint, carpet, light reconfiguration), $15 to $35/sq ft is normal. For a full buildout from shell or "warm shell" space, demand $50 to $80/sq ft, and for restaurants, medical, or lab space the number runs $80 to $200+/sq ft because the mechanical, plumbing, and electrical loads are brutal.

The single biggest money move: TI allowance is funded by your rent, so every dollar the landlord "gives" you is amortized back into your rate at roughly 6% to 9% interest over the term. Get the allowance high, the rate low, and make the landlord eat the soft costs — or you are paying for your own buildout twice.

The rule of thumb every tenant rep uses: a landlord will typically fund about $1 of TI for every $0.10 to $0.15 of annual rent over a 5-year term. So a $30/sq ft TI package on a 5-year deal is "worth" roughly $6/sq ft/year of rent — which means the landlord is baking that recovery into your face rate whether you see it on the term sheet or not.

How TI Allowance Actually Gets Funded (and Why You're Paying for It)

Landlords are not philanthropists. TI allowance is a financing instrument. When a landlord offers $50/sq ft on a 7-year lease, they are lending you that money and recovering it through your base rent at an internal rate of return of 6% to 9%.

• Longer term = bigger allowance. A 3-year deal might get you $10 to $20/sq ft; a 10-year deal can justify $60 to $100/sq ft because the landlord has more years to amortize.
• Stronger credit = bigger allowance. A national tenant with audited financials gets more TI than a two-year-old LLC, because the landlord's recovery risk is lower.
• The "blend" trap. Landlords love to quote a low face rent and a fat TI number, then quietly amortize the TI on top. Always ask: "Is this TI amortized into the rent, and at what rate?" If they say 10% or higher, push back hard — that is above-market financing.

Negotiation lever: ask for the TI as a true concession (landlord-funded, not amortized) on at least the portion needed for base-building work like HVAC and ADA-compliant restrooms. Those should never come out of your allowance.

What the Allowance Must Cover — And What the Landlord Should Eat

Here is where tenants get screwed: landlords try to make your TI dollars pay for their building. Draw a hard line.

• Your TI should cover: flooring, paint, interior partitions, your suite's lighting, data/cabling, supplemental cooling for your server room, signage, and finishes.
• The landlord should cover (NOT your TI): base-building HVAC, ADA-compliant common areas and restrooms, code compliance for the core and shell, roof, structure, and bringing the space to "vanilla shell" or "warm shell" condition.
• Soft costs add 15% to 25%. Architecture, engineering, permits, and construction management fees can eat $8 to $15/sq ft before a single nail goes in. Negotiate that the allowance covers soft costs on top of hard construction, or you will run out of money at drywall.

Watch the "construction management fee." Many landlords charge 3% to 5% of total project cost to "oversee" your buildout. On a $500,000 job that is $15,000 to $25,000 of pure margin. Cap it at 2% or strike it entirely if you're using your own general contractor.

The Numbers by Space Type (Real 2027 Ranges)

Reality check: if a landlord offers $10/sq ft for a full office buildout, they are handing you a fraction of the $60 to $120/sq ft that construction actually costs. You will fund the gap out of pocket. Either get the allowance up or get a free-rent period to offset the cash drain.

Negotiation Levers That Win More TI

• Trade rate for TI. If the landlord won't raise the allowance, ask for 2 to 4 months of free rent instead — that is roughly $8 to $20/sq ft of additional concession depending on your rate.
• Get the unused allowance as a rent credit. Many leases let unused TI evaporate. Negotiate that leftover TI converts to free rent or a credit, so you are never incentivized to overspend.
• Control the contractor. Insist on competitive bids from at least three GCs and the right to use your own. Landlord-mandated contractors routinely bid 10% to 20% high.
• Demand the allowance be paid on completion, not "as funds allow." Get a hard funding schedule with a default remedy (offset against rent) if the landlord stalls payment.

The Traps That Cost Tenants Real Money

• The "as-is" handoff. Landlord delivers a space with a dying 18-year-old rooftop HVAC unit and expects your TI to replace it. Make HVAC condition a landlord warranty, not your problem.
• Permit delays eating free rent. If your free-rent clock starts at lease signing but permits take 4 months, you lose half your concession. Tie rent commencement to substantial completion or occupancy.
• The over-standard chargeback. Building-standard finishes are cheap; anything "over-standard" gets charged back to you. Get the building standard spelled out in writing so you know what's actually free.
• Restoration / removal clauses. Some leases make you rip out your own improvements at the end at your cost — a $20,000 to $100,000 surprise. Negotiate "no restoration obligation for normal office improvements."

FAQ

What is a fair TI allowance for a 5-year office lease? For second-generation space, $20 to $40/sq ft; for a buildout from shell, $40 to $65/sq ft. Anything below $15/sq ft on a 5-year deal means you are self-funding most of the work.

Can I get cash instead of a TI allowance? Sometimes — it's called a "TI in lieu" or cash allowance. Landlords resist it because they lose control and the tax treatment changes, but on a strong-credit deal you can often convert part of the allowance to free rent, which spends like cash.

Who owns the improvements when the lease ends? Almost always the landlord — fixtures become part of the building. That's exactly why you should never fund base-building work and should negotiate no removal/restoration obligation for standard improvements.

What if my buildout costs more than the allowance? You pay the overage out of pocket or finance it. Before signing, get a real GC estimate so you know the gap. Then negotiate more allowance, more free rent, or a lower rate to cover it — never sign blind.

Is the construction management fee negotiable? Yes. The standard 3% to 5% is pure landlord margin. Cap it at 2% or eliminate it if you bring your own licensed GC and architect.

Sources

• CBRE — Tenant Representation and Office Occupier Cost Guides (TI allowance benchmarks by market).
• JLL — Office Fit-Out Cost Guide (build cost and allowance ranges by space type).
• Cushman & Wakefield — Occupier Lease Negotiation and TI amortization practices.
• BOMA International — building-standard and base-building delivery condition standards.
• IREM (Institute of Real Estate Management) — landlord cost-recovery and TI financing norms.
• NAIOP — Commercial Real Estate Development Association, buildout cost research.
• The BOMA Experience Exchange Report (EER) — operating and tenant improvement cost data.