Tenant Improvement Allowances (aka TIs or TIAs) are a central component of commercial office lease negotiations. Landlords use them as deal sweeteners to attract more tenants, while companies look to customize their spaces as real estate becomes a crucial tool in recruiting.
In recent years, TI allowances have increased due to several factors:
- Increase in office supply
- Amenities arms race
- Tenant flight to quality
- Rise in construction costs
While TI costs are on the rise as a function of these market factors, landlords, tenants, and brokers should consider the respective motives of each party regarding TI during lease negotiations.
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