Tenant Improvement Allowance (TI)
Money provided by the landlord to help a tenant customize or build out their space, typically expressed as a dollar amount per square foot.
Definition
A Tenant Improvement Allowance (TI or TIA) is a concession landlords offer to help tenants pay for modifications to their space. In small bay industrial, TI is less common than in office or retail—new flex parks typically deliver vanilla shell units (concrete floors, basic electrical, roll-up door) that tenants accept as-is or build out at their own expense. TI becomes more relevant in second-generation space where a previous tenant's buildout needs modification, in older properties requiring updates, or in competitive markets where landlords use TI to win deals. When offered, TI can be structured as cash, reimbursement for completed work, or work performed by the landlord. Many small bay operators prefer doing the work themselves rather than giving cash, maintaining control over quality and costs while ensuring improvements benefit future tenants.
Example
An electrical contractor wants to lease a 2,500 SF second-gen unit that has an outdated office buildout from the previous tenant. The landlord offers $8/SF TI ($20,000) toward demolishing the old office and creating a smaller, more functional space. In a newer flex park down the street, units lease as vanilla shells with no TI—tenants build out at their own cost.