Free tool
Tenant improvement allowance calculator
A landlord's tenant improvement (TI) allowance is quoted per square foot. Turn it into dollars, see how much of your build-out it covers, and what the rest costs you in cash or as amortized TI added to the rent.
The landlord's allowance
$300,000
Covers 54% of the budget, $6.00/SF per lease year over 10 years
| Build-out budget | $550,000 |
|---|---|
| Less the allowance | -$300,000 |
| Your part | $250,000 |
Or amortized into the rent at 8% over 10 years
$3,033 a month
$7.28/SF a year on top of the rent, which takes $70.00 to $77.28 (10.4% more). You repay $363,983 over the term, $113,983 of it interest.
As a rent discount instead, the allowance is worth about $8.74/SF a year over 10 years at 8% (straight line: $6.00). Compare that with a lower-rent offer. See the net effective rent
Arithmetic on your numbers, not a quote. Amortized TI here is a level monthly payment over the whole term; your lease may set a different term, rate or cap for it.
The starting numbers are an example deal to show how the math works, not market figures. Change them to match the landlord's offer and your contractor's price.
How to calculate a TI allowance
- The allowance in dollars. Allowance per SF x rentable SF: $60 x 5,000 SF = $300,000.
- The budget. Build-out cost per SF x rentable SF: $110 x 5,000 SF = $550,000, design and permits included.
- Your part. Budget less allowance: $550,000 - $300,000 = $250,000, paid in cash or amortized.
- Amortized TI. The monthly payment that repays $250,000 over 120 months at 8% a year: $3,033 a month, x 12 / 5,000 SF = $7.28 per SF a year on the rent.
- Per lease year. Allowance / term: $60 / 10 years = $6.00 per SF per year, the way to compare offers with different terms.
Amortized TI here is a level monthly payment over the whole term at the rate you enter. A lease may amortize over a shorter period, cap how much the landlord will lend, or charge a different rate; use its numbers. Rent, free rent and increases live in the commercial rent calculator, which takes the allowance into the net effective rent.
Questions
What is a tenant improvement allowance?
Money the landlord agrees to put toward building out a tenant's space: walls, ceilings, lighting, air distribution, finishes and the design and permits behind them. It is quoted in dollars per rentable square foot, written into the lease's work letter, and usually paid out against the contractor's invoices as the work is done, or as a reimbursement once it is finished.
How do you calculate a tenant improvement allowance?
Multiply the allowance per square foot by the rentable square feet. 5,000 SF at $60 per SF is $300,000. Then compare it with the build-out budget: at $110 per SF the work costs $550,000, so the allowance covers 54% and the tenant pays the other $250,000.
What is amortized TI?
When the build-out costs more than the allowance, the landlord may lend the difference and add it to the rent, with interest, over the lease term. That is amortized (or additional) TI. In the example, $250,000 over 10 years at 8% is $3,033 a month, or $7.28 per SF a year on top of the rent: $363,983 repaid, $113,983 of it interest. At 0% the same gap would add $5.00 per SF a year.
How do I compare TI allowances on leases of different lengths?
Divide the allowance by the years of the term. $60 per SF on a 10-year lease is $6.00 per SF per lease year; the same $60 on a 5-year lease is $12.00, twice as rich. Landlords usually offer more for longer leases because they have more years of rent to earn it back.
Is a bigger allowance better than lower rent?
Not always. A dollar of allowance is paid up front and a dollar of rent discount is spread over the term, so compare them per year: at 8% over 10 years, a $60 per SF allowance is worth about $8.74 per SF a year off the rent. The net effective rent puts both on one scale: 5,000 SF at $70 per SF with this allowance has a net effective rent of $64.00, before free rent and increases.
What happens to the unused part of a TI allowance?
It depends on the lease. Some work letters let the tenant put leftover allowance toward rent, furniture, cabling or moving costs, often up to a cap; others say anything not spent by a deadline is lost. If your budget may come in under the allowance, negotiate where the rest goes before you sign.
What does a TI allowance usually pay for?
The hard costs of the work (construction, mechanical, electrical and plumbing, finishes) and, if the lease allows, soft costs such as the architect, engineers, permits, expediting and the landlord's supervision fee. Furniture, cabling, signs and moving are often excluded or capped. The work letter lists what counts, so put only those items in the budget you compare against it.
What is the difference between a TI allowance and a turnkey build-out?
With an allowance the tenant runs the project and pays anything above the fixed amount. With a turnkey build-out the landlord builds an agreed plan at its own cost, so overruns are the landlord's problem, but the tenant has less say over the contractor, the schedule and the finishes. If the budget equals the allowance (here $300,000 for 5,000 SF), the two deals cost the tenant the same on paper.
Does a build-out in NYC need a permit?
Most interior build-outs in New York City need Department of Buildings approval and work permits, filed in DOB NOW by a licensed architect or engineer; painting, carpet and similar finish work usually does not. Permits take time, so they belong in the schedule as well as the budget. In the 12 months to October 2026, DOB permitted 3,562 interior build-outs in the 1,682 large office buildings Leasemark tracks.