Definition
A TI allowance is money a landlord agrees to contribute toward building out a tenant’s space, usually stated as a dollar amount per square foot in the lease.
TI Allowance, Explained
Landlords offer TI allowances to win tenants: instead of leasing an empty or dated space, they help pay to make it usable. The allowance is written into the lease, for example "$40 per rentable square foot," and paid out against invoices as the work is completed.
Anything the build-out costs above the allowance is usually paid by the tenant. If the work costs less, many leases let the landlord keep the difference, though some let tenants apply leftover money to rent, furniture, or cabling.
The allowance is often based on rentable square feet, which includes a share of common areas, while the construction is priced on usable square feet. That difference can make an allowance look bigger than it really is.
Why It Matters for Your Project
Getting a real construction estimate before you sign the lease tells you whether the allowance covers your plans or whether you need to negotiate more, change the design, or budget the gap yourself.
What to Watch For
- Check which costs the allowance can cover: some leases exclude furniture, cabling, signage, or design fees.
- Look for a deadline: unused allowance often expires if not spent within a set time.
- Find out whether the landlord charges a construction management fee against the allowance.
- Understand how and when the landlord pays out (lien waivers and invoices are often required).