TI allowances ($20-$80/sqft) should never appear in CAM charges, but landlords sometimes amortize them into operating expenses, spreading the cost to all tenants.
A tenant improvement (TI) allowance clause defines the dollar amount or per-square-foot allowance the landlord provides toward the cost of building out or customizing the tenant's space. The clause specifies the total amount, eligible expenses, disbursement procedures, and what happens to any unused allowance. TI costs paid by the landlord should never appear in operating expenses.
Tenant improvement costs are the landlord's investment in securing a lease, not an operating expense that should be shared by all tenants. However, TI costs sometimes appear in CAM reconciliations, either directly or amortized as part of "building improvements." When landlords pass TI costs through as operating expenses, all tenants subsidize a cost that should be borne solely by the landlord.
“Landlord shall provide Tenant with a Tenant Improvement Allowance of Forty Dollars ($40.00) per rentable square foot of the Premises, for a total allowance of Two Hundred Thousand Dollars ($200,000). The Allowance shall be applied solely to the cost of Tenant's initial buildout improvements, including design, permitting, construction, and project management fees. Landlord shall disburse the Allowance within thirty (30) days of receipt of paid invoices and lien waivers. The TI Allowance and all costs associated with the initial buildout shall not be included in Operating Expenses in any Lease Year.”
This is illustrative language only. Your actual lease language controls your rights.
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$20-$80/sqft
Tenant improvement allowances typically range from $20 to $80 per square foot depending on property type and market [industry estimate]
Source: CBRE / Tenant Improvement Benchmark Report (2024)
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