A tenant improvement allowance (also called a TI allowance or TIA) is money a landlord contributes toward building out or upgrading your office before you move in. It's usually quoted in dollars per rentable square foot, and the amount depends mostly on how long you sign for. On long leases in major markets, allowances now average roughly $90–$120 per square foot. On the one- to three-year leases most startups sign, landlords rarely offer cash at all. They do specific work on the space instead, or give free rent.
Key takeaways
- Term drives the number: a common rule of thumb is $5–$10 per square foot of allowance for each year of lease term, more for raw space in top buildings.
- National benchmark: CBRE put the average allowance on new office leases in 12 major U.S. markets at $87.51 per square foot in 2024.
- Manhattan runs higher: Avison Young data put Manhattan allowances at $120.80 per square foot in September 2026.
- Short leases rarely include cash: in Tandem's <5,000 square feet deals of two years or less, about 1 in 20 included any improvements, and those were almost always specific landlord work, not an allowance.
- Allowances rarely cover a full build-out: Cushman & Wakefield puts the average U.S. office fit-out at $162 per square foot, and San Francisco at $228.
What Is a Tenant Improvement Allowance?
A tenant improvement allowance is a fixed budget, set in your lease, that the landlord pays toward changes to your suite: walls, flooring, lighting, kitchens, electrical, and similar work. It's sometimes called a leasehold improvement allowance or a build-out allowance.
It's quoted per rentable square foot. A $40 per square foot allowance on a 5,000-square-foot suite is a $200,000 budget. A standard allowance doesn't have to be paid back. The landlord recovers it through your rent over the lease term, which is why longer leases get bigger allowances.
The allowance is negotiated alongside rent, term, and free rent in your letter of intent (LOI), then written into a section of the lease called the work letter. For how the LOI fits into the overall process, see how to lease office space.
How Does a TI Allowance Work?
- Negotiate it in the LOI: state the amount per square foot, what it can be spent on, and what happens to any money left over.
- Define it in the work letter: the lease spells out the allowance, the approval process for plans, and the deadline to use it.
- Design and price the work: an architect draws plans, the landlord approves them, and contractors bid. Get bids before you sign if you can.
- Build: permits and construction typically add 4–12 weeks before move-in, depending on scope.
- Get paid: the landlord either pays contractors directly or reimburses you in installments as you submit invoices and lien waivers.
Two costs catch tenants off guard. Many landlords charge a construction management fee, often a few percent of the project, for overseeing the work. And many leases cap how much of the allowance can go to soft costs like design and engineering, often around 10–15%.
How Much TI Allowance Is Typical?
Lease length matters more than anything else, because the landlord recovers the allowance through rent over the term. The ranges below are Tandem's estimates for startup-sized suites, generally under 10,000 square feet, in New York, San Francisco, and Boston. They're based on the market data in this article and on Tandem's own deals.
|
Lease term |
What startups usually get |
Typical cash allowance (estimate) |
|---|---|---|
|
12 months or less |
Space as-is; occasionally a small landlord fix |
None |
|
13–24 months |
As-is, or specific landlord work like paint, carpet, or removing a wall |
None to $10/sq ft |
|
25–36 months |
Landlord work and/or 1–3 months of free rent; a small allowance is possible |
$10–$30/sq ft |
|
4–5 years |
An allowance becomes standard, often with free rent |
$30–$60/sq ft |
|
7–10+ years |
Large allowances, especially for raw space in Class A buildings |
$75–$150+/sq ft |
Those ranges line up with the common rule of thumb of $5–$10 per square foot for each year of term. Second-generation space (an existing build-out you can largely reuse) gets less. Raw or shell space in a top building gets more, because it can't be leased without a build-out.
Market benchmarks
- United States: CBRE's analysis of 4,350 new office leases in 12 major markets put the 2024 average allowance at $87.51 per square foot, down from $97.55 in 2023, with an average of 8.9 months of free rent (CBRE). Note, however, that these are for much larger and longer leases than most startups would come close to touching.
- New York City: Manhattan allowances reached $120.80 per square foot in September 2026, up 7.9% from a year earlier and about 59% above 2019, according to Avison Young data reported by Commercial Observer. Those averages are weighted toward large, long-term leases as well.
- San Francisco and Boston: Reliable allowance averages are harder to find. San Francisco has the highest build-out costs of any U.S. market, and with vacancy still elevated, landlords in many buildings compete with larger packages. Boston build-out costs rose 19% year over year in 2026, one of the steepest increases Cushman & Wakefield recorded. In both cities, compare offers building by building.
TI Allowance vs. Landlord's Work vs. Turnkey
A cash allowance is only one way a landlord can pay for changes to your space. On shorter leases, the others are often more realistic.
|
Option |
How it works |
Who manages construction |
Who pays for overruns |
Best for |
|---|---|---|---|---|
|
TI allowance |
Landlord funds a fixed $/sq ft budget |
You, with landlord approval |
You pay anything above the allowance |
Longer leases and custom layouts |
|
Landlord's work |
The lease lists specific items the landlord will complete |
Landlord |
Landlord, for the listed items |
Short leases and targeted changes |
|
Turnkey build-out |
Landlord builds the suite to an agreed plan |
Landlord |
Landlord, up to the agreed spec |
Teams that want a finished space with little hassle |
|
As-is |
You take the space in its current condition |
No one |
You |
Move-in-ready space and short terms |
In Tandem's startup deals, landlord's work is how improvements usually happen. Recent examples include removing a glass wall, installing two phone booths, new paint and carpet, an updated kitchen, running power to the desk area, and splitting one conference room into two.
You can also combine approaches: landlord's work for base items like paint and carpet, plus a smaller allowance for the changes you want to control.
What Can a TI Allowance Be Used For?
Usually covered (hard costs):
- Walls, doors, and glass partitions
- Flooring, ceilings, and paint
- Lighting and electrical work
- Plumbing for kitchens and bathrooms
- HVAC distribution within your suite
- Fire and life-safety changes, and building permits
Often capped (soft costs): architecture, engineering, project management, and permit expediting. A cap of around 10–15% of the allowance is common.
Usually excluded, but worth negotiating: furniture, data cabling, AV and security systems, signage, and moving costs. If you're asking for a bigger allowance than you need for construction, ask for the right to spend the remainder on these items.
How Much Does an Office Build-Out Actually Cost?
Allowances rarely cover a full build-out. Cushman & Wakefield's 2026 fit-out guide put the average U.S. office fit-out at $162 per square foot and the Americas average at $149, up 5.5% in a year. The Tri-State region around New York averaged $193, and San Francisco was the most expensive U.S. market at $228 (Cushman & Wakefield).
Even a generous $90 per square foot allowance covers only part of a full build from raw space. A light refresh of existing space costs far less, which is why reusing a second-generation build-out is usually the cheapest path for a startup. It's also why 96% of NYC teams on Tandem discovery calls asked for move-in-ready space (NYC Market Report).
What Happens If You Go Over or Under the Allowance?
Over the allowance: you pay the difference, either upfront or as additional rent. Some landlords will fund extra improvements and amortize them into your rent at an interest rate, commonly 6–10%. For example, an extra $20 per square foot amortized over five years at 8% adds about $4.87 per square foot per year to your rent.
Under the allowance: by default, unused money goes back to the landlord, and most allowances expire if they aren't used by a deadline, often within the first year. Negotiate for leftover funds to be credited against rent or used for furniture and cabling.
If you leave early: many leases require you to repay the unamortized part of the allowance if you default or terminate early. Read the termination and default sections carefully.
How to Negotiate a Bigger TI Allowance
- Ask early and specifically: put the amount, or a list of landlord's work, in your LOI. It's much harder to add after the business terms are agreed.
- Price the work first: a contractor's estimate turns your request from a wish into a number the landlord can underwrite.
- Trade term for improvements: going from three to five years is the single biggest lever on allowance size.
- Weigh allowance against free rent: one month of free rent is worth one-twelfth of a year's rent per square foot. At $70 per square foot, a month free is worth about $5.83 per square foot of allowance.
- Negotiate the fine print: the soft-cost cap, the construction management fee, the deadline to use the allowance, and whether leftover funds become a rent credit.
- Check the restoration clause: find out whether you'll have to remove the improvements, and pay for it, when the lease ends.
- Use a tenant rep broker: brokers know what comparable deals in the building included, and the landlord pays their fee.
Here's illustrative LOI language, which your attorney should adapt to your deal:
"Landlord shall provide a tenant improvement allowance of $[X] per rentable square foot ($[total]) for Tenant's initial improvements. Up to 15% of the allowance may be applied to soft costs. Any portion not used within 12 months of the commencement date shall be credited against base rent."
TI Allowances on Short Leases: What Startups Should Expect
Across Tandem's private-office deals signed since July 2025:
- On leases of 24 months or less, about 1 in 20 included any landlord improvements, and about 1 in 15 included free rent, usually one month.
- On leases of 25–36 months, about 1 in 8 included improvements, and about half included free rent, with a median of two months.
- On the few deals longer than three years, every one included free rent, with a median of three months.
The lesson for a startup signing one to three years: don't count on a cash allowance. Choose space that already works, ask for a short, specific list of landlord's work in your LOI, and negotiate free rent if you're committing to three years. The median Tandem private-office lease is 17 months, which sits squarely in landlord's-work territory. To compare total costs across lease structures, see office lease types.
Subleases and shared spaces work differently. They rarely include an allowance, because the space is already built out, and that existing build-out, often furniture included, is the main reason to choose them. See how to sublease office space in NYC.
Where to Start
The best time to negotiate improvements is before you sign the LOI, while every term is still open. Tandem helps startups find and lease private offices, subleases, and shared spaces in New York, San Francisco, and Boston, and negotiates rent, free rent, and improvements on your behalf at no cost to you.
Last updated: November 2026
This post was created with the assistance of AI tools. All content was reviewed by the author.
