Commercial tenant improvements: a practical guide

A tenant improvement — a TI — is the work that turns a bare or previously occupied commercial space into something a specific tenant can operate in. It is the most deadline-driven construction most businesses ever commission, and the deadline is usually written into a lease.

What is normally in scope

• Demising walls and interior partitions that define the space.
• Ceilings, flooring and wall finishes.
• Lighting, and the electrical and data distribution behind it.
• Millwork and built-in casework — reception desks, counters, storage.
• Washrooms, and any plumbing the layout requires.
• Mechanical adjustments: HVAC distribution, diffusers, zoning for the new layout.
• Coordination of the trades and consultants all of the above requires.

Who pays: the TI allowance

Most commercial leases include a tenant improvement allowance — a contribution from the landlord toward fitting out the space, often expressed per square foot. Two things about allowances catch tenants out.

First, an allowance is rarely the full cost. Anything beyond base-building standard — better finishes, a more complex layout, specialised equipment — is normally the tenant's own cost. Second, allowances are usually paid on completion against invoices, not advanced at the start, so the tenant finances the work in the interim. Both are worth confirming in writing before the scope grows.

The schedule is the real risk

A TI that overruns rarely fails on construction. It fails on the things in front of construction: permits, drawings, long-lead materials and landlord approvals. Meanwhile the lease commencement date does not move, so a tenant can end up paying rent on a space they cannot occupy while still paying rent somewhere else.

Which is why an optimistic schedule is worse than a long one. Ask any contractor quoting your TI what their assumptions are on permit timing and material lead times, and what happens to the date if those slip.

Working in an occupied building

Most TIs happen in buildings where other tenants are trading and, in mixed-use, residents are living. That is a different discipline from building something empty, and it needs to be in the scope from the start:

• Staged scheduling around the hours the building actually operates.
• Dust and noise control, and protection of shared corridors and elevators.
• Exits and life-safety routes kept usable throughout.
• Notices to neighbouring tenants or residents before anything disruptive.
• Loading bay and service elevator bookings — on a tight downtown site, this constraint alone can shape the programme.

How to compare quotes properly

The lowest TI quote is frequently the one with the vaguest scope, and the gap gets recovered through change orders once the work has started and you have no leverage. Ask for the scope in writing, with exclusions listed explicitly. A contractor willing to tell you what is not included is giving you the more useful number.

Frequently asked