Tenant Improvement Allowance Calculator
See what your buildout really costs out of pocket after the landlord’s TI allowance — and what it adds to your true monthly rent.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator estimates what building out a leased space will cost you out of pocket after the landlord’s tenant-improvement (TI) allowance, and what that buildout adds to your true monthly occupancy cost. Quoted rent is only part of what a space costs — a $75/sf buildout on 2,000 sq ft is $150,000 before you open the doors. Spreading your share across the lease term shows the real monthly number to budget against.
The formulas
- Total buildout cost
- square feet × buildout cost per sq ft
- TI allowance value
- square feet × landlord TI allowance per sq ft
- Your out-of-pocket cost
- total buildout − TI allowance value, floored at $0If the allowance meets or exceeds the buildout, you pay nothing out of pocket (unused allowance does not come back as cash).
- Allowance coverage
- TI allowance value ÷ total buildout cost
- Monthly amortized buildout
- out-of-pocket cost ÷ (lease years × 12)
- Effective monthly occupancy cost
- monthly rent + monthly amortized buildout
Worked example
- Say you are building out 2,000 sq ft at $75/sf with a $30/sf landlord TI allowance, $4,000/month rent, and a 5-year lease.
- Total buildout = 2,000 × $75 = $150,000.
- TI allowance = 2,000 × $30 = $60,000 — covering 40% of the buildout.
- Your out-of-pocket = $150,000 − $60,000 = $90,000.
- Spread over the 60-month lease, that is $90,000 ÷ 60 = $1,500/month.
- Effective occupancy cost = $4,000 rent + $1,500 amortized buildout = $5,500/month — 37.5% more than the quoted rent.
Rates, benchmarks & sources
- Buildout cost presets: basic office ~$50/sf, retail ~$100/sf, restaurant ~$250/sf — Industry rule of thumb (construction costs vary widely by market and trade)
- Buildout of $200/sf or more is flagged as special-use (high cost, low reuse value if you leave) — Module convention
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- The $/sf presets are broad rules of thumb — actual buildout costs come from contractor bids and vary sharply by market, condition of the space, and scope (a "vanilla shell" and a raw shell are very different starting points).
- Straight-line amortization only: it does not add financing costs, so if you borrow to fund the buildout, interest raises the real monthly figure.
- It assumes the full allowance is usable against your costs; many leases restrict TI to hard construction costs, require landlord approval of contractors, or reimburse only after completion — cash-flow timing this tool does not model.
- Permits, architect and engineering fees, furniture, fixtures, equipment, and IT cabling may sit outside a per-square-foot construction number depending on how you estimate it.
- Tax treatment of leasehold improvements (depreciation, who owns the improvements) is outside this tool and depends on how the lease is written.
Frequently asked questions
What is a TI allowance and how does it work?
A tenant-improvement allowance is money the landlord contributes toward customizing the space for you, quoted per square foot — $30/sf on 2,000 sq ft is $60,000. It is negotiated as part of the lease, usually paid as a reimbursement during or after construction, and anything your buildout costs beyond it comes out of your pocket. Unused allowance typically does not come back to you as cash.
How much does a buildout typically cost per square foot?
As rules of thumb only: basic office work runs around $50/sf, retail around $100/sf, and restaurants around $250/sf, driven by kitchens, ventilation, and plumbing. These are planning presets, not quotes — the starting condition of the space matters enormously, and real numbers come from contractor bids in your market. The tool flags anything at $200/sf or above as special-use buildout.
Can I negotiate a bigger TI allowance?
Often, yes — TI is one of the main levers in a lease negotiation, alongside free rent and the base rate. Landlords frequently trade a larger allowance for a somewhat higher rent or a longer term, since they recover it over the lease. Running this tool both ways shows whether that trade works for you: an extra $10/sf of allowance on the default example cuts your out-of-pocket by $20,000, which may be worth more than a small rent bump if cash is tight at opening.
Why should I add the buildout to my monthly rent?
Because the buildout is a real cost of occupying the space, just paid up front instead of monthly. Amortizing it across the lease reveals the true occupancy cost: in the default example, $4,000 quoted rent is really $5,500/month once the $90,000 out-of-pocket buildout is spread over 5 years. That is the number to compare across spaces — a cheaper-rent space needing heavy buildout can cost more than a pricier move-in-ready one.
What is the risk with a restaurant or other special-use buildout?
High cost with low reuse value. A $250/sf restaurant buildout is largely specific to that use — hoods, grease traps, dining-room finish — so if the business closes or relocates, most of that investment stays behind in a space the next tenant may gut. The heavier and more specialized the buildout, the stronger the case for pushing the landlord to fund more of it and for securing a lease term long enough to amortize your share.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Rates shown are estimates; actual offers depend on lender underwriting.