The definition
A tenant improvement (TI) allowance is money the landlord contributes toward building out or renovating a tenant's space, usually quoted in dollars per rentable square foot. A $100/SF allowance on a 10,000 SF suite is a $1,000,000 contribution.
What a TI allowance can pay for
- Construction: walls, ceilings, lighting, finishes, kitchens, and restrooms within the suite.
- Soft costs: architecture, engineering, permits, and project management, if the lease allows.
- Cabling, furniture, and moving costs, but only if the lease says so. Negotiate this explicitly.
How the allowance is sized
Allowances generally rise with building class and lease term, because a longer commitment gives the landlord more time to recover the investment. Second-generation space (already built out) often earns a smaller allowance than a raw shell. Current ranges are in our concessions tracker.
Turnkey vs. allowance
In a turnkey deal the landlord delivers the finished space to an agreed plan and bears the cost risk. With an allowance, the tenant controls the design and the landlord's contribution is capped. Which is better depends on how standard the build-out is and who is better placed to manage construction.
How to negotiate more
- Price the build-out before you sign: an architect's test fit and a budget turn the ask into a number.
- Trade term for allowance where it makes sense.
- Ask for an additional allowance to offset move costs, as we did for The Navajo Nation (+$10/SF).
- Make sure unused allowance can be applied to rent or other costs.
The Navajo Nation
A Washington office rebuilt to reflect the stature of the Nation's mission, with a full concession package, a rooftop conference room at no cost, and a seventh-year exit.
Read the case studyFrequently asked questions
Is a TI allowance taxable?
Have counsel or a tax advisor confirm the language before publishing.
Can a TI allowance be used for furniture?
Only if the lease allows it. Negotiate it explicitly; in some deals landlords have covered furniture directly.
Jake Payne
Partner, Clarity Tenant Representation. Jake specializes in representing local tenants across the D.C. region.