What Is a TI in Construction?

February 27, 2024

A TI (tenant improvement) allowance is the amount of money given to a tenant to cover build-out costs to make commercial space fit for their business. It is typically stated as either a per-square foot or total dollar sum and is decided upon during lease negotiations. Landlords prefer that TI construction be focused on hard costs and improvements that will add value to the building, such as structural or cosmetic renovations, HVAC, flooring, paint and wall construction. Landlords are not interested in covering soft costs, such as furniture and moving expenses.

The time frame for the payment of a TI allowance will also be decided upon during lease negotiations. It can be paid after the construction is completed and landlord receives all receipts or it can be paid at lease signing or bundled into monthly rent payments, with progress payments made as work is done.

Landlord-controlled TIs are usually offered as a turnkey process, with the landlord taking care of architectural and construction services for a tenant to ensure they get an acceptable build-out within their budget. Depending on the complexity of the project and the building, this can be very useful to a tenant as it saves them the cost of hiring their own contractors.

Tenant-controlled TIs can be more complex, especially in industrial spaces with extensive modifications required to meet specific manufacturing or R&D needs. Facility Builders & Erectors has worked on a variety of these types of projects including converting large open floors into clean rooms and specialty manufacturing spaces. In all of these cases, it is important to have a project management team in place to manage the build-out and keep the budget on track.


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