What is a Tenant Improvement Allowance? – Part 1
In a hurry:
Apply it today:
Owners use TI Allowances to entice tenants to occupy space
Owners improve the space, at their cost
Owners can use TI Allowance as leverage to negotiate other lease terms (rent rate, lease term escalations, guarantee, etc.)
By the end of this episode you’ll learn:
What is a Tenant Improvement (TI) Allowance?
How do you pay for it?
When does the TI Allowance get spent?
Considerations and points to keep in mind
Have a few minutes:
“You give and you get.” Its one of the oldest principles in the book. Owners want tenants in their buildings. Tenants want space that meet their needs.
In comes the Tenant Improvement (TI) Allowance. A TI Allowance is an amount paid by the owner to prepare a space for a new tenant. Many owners gladly pay to improve their space in exchange for a higher rent rate, longer lease term or even qualitative benefits like lease guarantees or options that benefit them.
Tenants gladly accept a TI Allowance because they can re-allocate their budget on expanding into a new location, hiring new personnel or other business (not real estate) related expenses.
Win-win. At least, most of the time...
This is the first of a multi-part series that dives into the Tenant Improvement Allowance, defines what it is, how it is used and important points to keep in mind when negotiating it.