Tenant Improvement Calculator Formula

Understand the math behind the tenant improvement calculator. Each variable explained with a worked example.

Use the Tenant Improvement Calculator

Formulas Used

Total TI Cost

total_cost = total_ti_cost

Landlord Allowance

landlord_covers = landlord_allowance

Tenant Out-of-Pocket

tenant_out_of_pocket = tenant_cost

Total Cost Per Sqft

actual_cost_psf = square_footage > 0 ? total_ti_cost / square_footage : 0

Allowance Coverage %

allowance_coverage = total_ti_cost > 0 ? landlord_allowance / total_ti_cost * 100 : 0

Variables

VariableDescriptionDefault
square_footageSquare Footage(sqft)3000
ti_cost_psfEstimated TI Cost Per Sqft(USD)45
landlord_allowance_psfLandlord TI Allowance Per Sqft(USD)30
architecture_pctArchitecture & Design Fee(%)8
permit_costPermits & Inspections(USD)3000
contingency_pctContingency(%)10
base_ti_costDerived value= square_footage * ti_cost_psfcalculated
arch_feeDerived value= base_ti_cost * architecture_pct / 100calculated
subtotalDerived value= base_ti_cost + arch_fee + permit_costcalculated
contingencyDerived value= subtotal * contingency_pct / 100calculated
total_ti_costDerived value= subtotal + contingencycalculated
landlord_allowanceDerived value= square_footage * landlord_allowance_psfcalculated
tenant_costDerived value= total_ti_cost - landlord_allowance > 0 ? total_ti_cost - landlord_allowance : 0calculated

How It Works

Tenant Improvement (TI) Budgeting

Tenant improvements are modifications made to commercial space to suit a tenant's specific needs. Understanding costs and the landlord's contribution is critical for lease negotiations.

Typical TI Costs

  • Light cosmetic: $15-$25/sqft (paint, carpet, minor updates)
  • Moderate buildout: $30-$60/sqft (new walls, ceilings, updated MEP)
  • Heavy buildout: $60-$120/sqft (restaurant, medical, lab)

    • Landlord TI Allowance

    The landlord typically provides a per-square-foot allowance toward improvements. This is negotiated in the lease and depends on:

  • Lease term (longer term = higher allowance)
  • Tenant creditworthiness
  • Market conditions
  • How specific the buildout is to the tenant

    • Important: TI vs. Rent Tradeoff

    A higher TI allowance often comes with higher rent. The landlord amortizes the TI cost into the rent over the lease term.

    Worked Example

    3,000 sqft office at $45/sqft TI cost, $30/sqft landlord allowance, 8% architecture fee, $3,000 permits, 10% contingency.

    square_footage = 3000ti_cost_psf = 45landlord_allowance_psf = 30architecture_pct = 8permit_cost = 3000contingency_pct = 10
    1. 01Base TI cost: 3,000 x $45 = $135,000
    2. 02Architecture fee: $135,000 x 8% = $10,800
    3. 03Permits: $3,000
    4. 04Subtotal: $135,000 + $10,800 + $3,000 = $148,800
    5. 05Contingency: $148,800 x 10% = $14,880
    6. 06Total TI cost: $148,800 + $14,880 = $163,680
    7. 07Landlord allowance: 3,000 x $30 = $90,000
    8. 08Tenant out-of-pocket: $163,680 - $90,000 = $73,680
    9. 09Allowance coverage: $90,000 / $163,680 = 55.0%

    Ready to run the numbers?

    Open Tenant Improvement Calculator