What the Heck Is a TI Allowance?

What the Heck Is a TI Allowance (and Why Should You Care)?

If you've ever dipped a toe into the world of commercial real estate, you've probably come across the term “TI Allowance” — short for Tenant Improvement Allowance — and wondered if it was something you should be excited about or skeptical of.

Spoiler alert: It’s both. But mostly, it’s a good thing — if you understand how it works.

The Basics

A Tenant Improvement Allowance is money that your landlord gives you — yes, gives you — to help cover the cost of customizing the space you're leasing to suit your business needs. We’re talking about everything from new flooring, paint, lighting, building out offices, installing walls, even putting in a breakroom (coffee machine not included, unfortunately).

Why Would a Landlord Pay for Your Improvements?

Great question. Here’s the deal: landlords want tenants. Paying for part of your build-out makes the space more attractive to you, and helps them fill vacancies faster. Plus, the improvements often stay with the building, so it's a long-term value play for them too.

Think of it as a strategic bribe — with drywall.

How It Works

The TI Allowance is usually expressed as a dollar amount per square foot. For example:

• 2,000 SF office

• $30 per SF TI allowance

• You get $60,000 to work with

Sometimes, it’s a lump sum. Either way, it’s negotiated as part of your lease terms.

But Don’t Get Too Comfortable...

It’s not a blank check. Here’s what you need to know:

• Reimbursement Basis: You usually front the money, then get reimbursed after work is done — so yes, you may need to float some cash.

• Landlord Approval: You can’t just install a disco floor and call it a day. Improvements usually require landlord sign-off, and funds often only apply to permanent improvements (i.e., no furniture, signage, or tech gadgets).

• Use It or Lose It: TI allowances don’t usually roll over. If you don’t spend the full amount, the leftover doesn’t go into your pocket.

Pro Tips

• Negotiate Smart: A higher TI allowance can be worth more than free rent, depending on your build-out needs.

• Hire a Pro: Bring in a project manager or contractor who knows how to deal with landlords and city permits.

• Watch the Lease Language: Know exactly what’s covered, what’s not, and what happens if you go over budget.

Bottom Line

A Tenant Improvement Allowance can be a huge win — it helps make a raw space functional, branded, and yours, all while keeping more of your capital in your wallet. But, like anything in commercial real estate, the devil’s in the details.

So read the fine print, negotiate wisely, and don’t let that TI money go to waste.