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What is Tenant Improvement Allowance ?


Almost every property out there that is available For Sale or For Lease will need to be retrofitted for the new user. In a lease this is called Tenant Allowance . Sometimes landlords will give $’s to the tenant for their particular improvements needed.

A tenant improvement allowance, also known as TI, TIA, or TA, is a negotiated sum of money that a landlord will provide the tenant in order to cover all or a portion of construction costs.

TIA is usually quoted as a $/sq ft amount.

I did a Shoe Show lease and the tenant asked for $15,000.00 of landlord funds to help with the buildout of the building to retrofit to Shoe Show’s needs. I gave up those funds only after the improvements were complete and all contractors had been paid. Proof provided. The funds from the landlord are usually only for actual construction costs not for any FF and E

Not all Landlords understand giving $ back to the tenant for construction sometimes landlords will do their part of the improvements and give the tenant basic improvements like handicap bathroom/bathrooms, basic electrical service and hvac unit but not the ductwork.

Like all decisions in Commercial Real Estate, how strong are you as a tenant will help landlord with the decision of how much Improvements dollars they want to negotiate, the stronger the financials the better the $.

If the landlord will not negotiate any TI’s then look to other ways on the lease to give you time to pay the rent 3 months or 6 months later than the executed date of the lease. This is called abatement of rent.

As you can see everything is negotiable in a lease. It’s very important to hire a great tenant representative agent and a great lawyer familiar with leasing.

All deals are different ! Who does the construction? Well that’s up to the deal negotiated!

In office buildings where the landlord wants to keep the quality of construction under his control then landlord will do the improvements. Unlike most retail space where the landlord will approve the contractor the tenant wants to use for the improvements.

If you need help finding a general contractor, either your agent or even the landlord should be able to recommend at least a handful of trustworthy options. Always get more than 1 bid unless you have worked with your contractor before on other projects and you were very satisfied.

The landlord will always want to not only approve your contractor but also your improvements.

There are a lot of moving parts to moving into a new space. Make sure your agent understands your needs wants and desires and budget. Making a plan and having your support system in place will help smooth out this process.

  • Commercial Agent
  • Banker for Funding
  • CPA
  • Contractor
  • Attorney (good in Real Estate transactions)

If it’s a complicated deal then further support system may include a tax attorney or an attorney that specializes in opportunity zones or tax abatement programs.

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