Tenant Improvement Allowance Explained: How to Use Commercial Lease Incentives in The Triangle
If you’re negotiating a new commercial lease in the Raleigh-Durham area, you may hear the term tenant improvement allowance (often shortened to “TI allowance”).
This is one of the most common—and most valuable—commercial lease incentives available, but many tenants don’t fully understand how it works or how to maximize it.
Let’s break down tenant improvement allowance explained in simple terms and show you how to use it to your advantage.
What Is a Tenant Improvement Allowance?
A tenant improvement allowance is money the landlord contributes toward customizing or improving the leased space for your business.
This can cover:
Interior build-outs (walls, flooring, ceilings)
Electrical or plumbing upgrades
Painting and finishes
Fixtures and cabinetry
How It Works
TI allowances are usually stated as a dollar amount per square foot in the lease. For example, if your lease is for 3,000 square feet and the landlord offers $40 per square foot, you’d have $120,000 toward improvements.
Why Landlords Offer This Incentive
Landlords want to attract quality tenants and keep spaces occupied. Offering a TI allowance helps businesses move in faster without a huge upfront cost. It’s a win-win: you get a space that works for you, and they get a long-term tenant.
Negotiating a Tenant Improvement Allowance
Here are tips for securing the best deal:
Know Market Rates – Work with a local broker to see what TI allowances are common in similar spaces.
Prioritize Essentials – Focus on improvements that directly impact your business operations.
Ask for Turnkey Build-Out – In some cases, the landlord will manage and pay for the work directly.
Extend Lease Term – Landlords may offer a higher allowance for a longer commitment.
How TI Allowances Are Paid
Reimbursement – You pay for the work and submit receipts to be reimbursed.
Direct Payment – Landlord pays the contractor directly.
Rent Credit – Allowance applied to reduce rent during the build-out period.
Avoid Common Pitfalls
Hidden Costs – Allowance may not cover all expenses, so budget for overages.
Approval Delays – Get landlord approval on designs and contractors early.
Expiration Clauses – Some leases require you to use the allowance within a set time frame.
Why It Matters in Raleigh-Durham
With so much business growth in the Triangle—especially in RTP, Downtown Durham, and North Hills—landlords are actively competing for tenants. That means savvy businesses can often negotiate strong TI allowances to create the perfect space without draining their capital.
Need Help Negotiating a TI Allowance?
As a local commercial real estate advisor, I help tenants understand commercial lease incentives, secure the best possible terms, and ensure their new space supports business success from day one.