Tenant improvement allowances: how much to offer without overpaying
“Tenants want me to pay for their build-out and I don't know what's reasonable.”
By Jose Eduardo Hernandez · REALTOR®, KW Commercial · Nov 2026
A tenant improvement (TI) allowance is money you contribute to get the space ready for a tenant. It can win you a good tenant, or lock you into a bad deal.
Think of TI as a loan the tenant repays through rent. The questions that matter:
- How long is the lease? A longer term gives you more time to earn back the allowance.
- Who benefits after they leave? Upgrades like HVAC, restrooms and electrical help the next tenant too. Custom finishes for one business usually don't.
- How strong is the tenant? The more you invest, the more their financials and guarantee matter.
Pay the allowance against invoices or on completion, not up front. Tie it to the work actually done.
A simple test: divide the TI amount by the number of months in the lease. If that monthly figure is a big share of the rent, either shorten the allowance, lengthen the term or raise the rent.
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General information for Illinois owners, buyers and sellers, not legal, tax or lending advice. Every property and lease is different; talk with an attorney, accountant or lender about your situation.