Tenant Improvements (TI)
Modifications made to a space so it fits the tenant's use, and the negotiated question of who pays.
01
What It Is
Tenant improvements are the buildout items that make a space usable for a particular business — walls, flooring, lighting, restrooms, HVAC changes, electrical capacity, plumbing, storefronts, and finishes.
TI can be handled as a landlord-delivered buildout, as an allowance stated in dollars per square foot, as free rent in lieu of construction, or as work the tenant performs itself.
02
Why It Matters
Buildout is often the largest upfront cost of occupying commercial space, and how it is structured affects cash flow, the length of term a landlord will expect, and how much rent the space can support.
Scope definition matters as much as dollars. An allowance that does not cover code-required upgrades, ADA work, or a fire sprinkler modification can leave a tenant with an unplanned expense before opening.
Ownership at lease end also needs to be addressed: what stays, what may be removed, and whether restoration will be required.
03
Common Misconceptions
- "The allowance covers everything needed to open." Allowances frequently exclude permits, design, signage, equipment, and code upgrades.
- "TI is only for large tenants." Small-space leases regularly include improvement work or rent concessions.
- "Improvements I pay for are mine." Fixtures often become the landlord's property at lease end unless the lease says otherwise.
04
Questions to Ask
- What condition will the space be delivered in, and what work is included?
- Is the allowance per square foot, and what expenses may it be applied to?
- Who obtains permits and carries responsibility for code compliance?
- Who manages construction, and what happens if delivery is delayed?
- What must be removed or restored when the lease ends?
05
Related Reading & Resources
The most successful real estate decisions often involve collaboration between several professionals working toward the same goal. Understanding each person's role helps you ask better questions and make more confident decisions.
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Other Lease Terms
- Gross LeaseA lease where the landlord pays most or all operating expenses and the tenant pays a single, predictable rent.
- Modified Gross LeaseA middle-ground structure where landlord and tenant split operating expenses in a negotiated way.
- Triple Net (NNN) LeaseA structure where the tenant pays base rent plus property taxes, insurance, and maintenance.
- CAM ChargesThe shared costs of operating and maintaining areas all tenants use, billed as a pro-rata share.
- Letter of Intent (LOI)A preliminary document outlining the main business terms before a formal lease is drafted.
- Percentage LeaseA retail structure where rent includes a base amount plus a percentage of sales above a threshold.
Questions About a Commercial Lease?
Whether you're evaluating space for your business or preparing to lease your property, I'd be happy to help you review the terms, understand the economics, and negotiate an agreement that fits your plans.
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