US tenant improvement allowance (TIA) is the most important non-rent economic in a US Class A lease — typically USD 80–150/sf for 7–10 year terms, drawn down on construction-progress milestones, and structured as cash (not landlord-in-kind) wherever possible.
Typical: USD 80–150/sf for 7–10 year US Class A terms; trophy reaches USD 150–250/sf.
Negotiate as cash, not landlord-in-kind delivery — gives vendor control.
Draw down on construction-progress milestones (typically 4–6 stages).
Excess TIA amortises into rent at 6–8% — model as rent in effective-rent comparison.
TIA is contractually rent — owed even on early termination unless explicitly carved out.
Bundle TIA with abatement; landlords trade between the two on relative value.
US TIA Strategy
US fit-out-capex">tenant improvement allowance (TIA) is the most important non-rent economic in a US Class A lease — typically USD 80–150/sf for 7–10 year terms, drawn down on construction-progress milestones, and structured as cash (not landlord-in-kind) wherever possible.
TL;DR
Typical: USD 80–150/sf for 7–10 year US Class A terms; trophy reaches USD 150–250/sf.
Negotiate as cash, not landlord-in-kind delivery — gives vendor control.
Draw down on construction-progress milestones (typically 4–6 stages).
Excess TIA amortises into rent at 6–8% — model as rent in effective-rent comparison.
TIA is contractually rent — owed even on early termination unless explicitly carved out.
Bundle TIA with abatement; landlords trade between the two on relative value.
What this is
Tenant improvement allowance (TIA) is the landlord's cash contribution toward the tenant's fit-out of a US Class A lease. It is the largest non-rent economic in a typical US deal, ranging from USD 80–150/sf for 7–10 year terms on standard Class A space and reaching USD 150–250/sf for trophy and longer-term deals. Structured well, TIA covers the bulk of base/mid-tier fit-out spec; structured badly, it leaves the tenant with a rent-amortised excess that quietly inflates effective rent over the term.
TIA quantum: the typical bands
For US Class A office, the typical TIA bands are: (1) sublease">sublease and short-term (≤3 years): often zero or USD 20–40/sf; (2) standard 5-year term: USD 50–80/sf; (3) standard 7-year term: USD 80–120/sf; (4) standard 10-year term: USD 100–150/sf; (5) trophy 10+ year term: USD 150–250/sf or higher. New construction lease-up product attracts the upper end of each band; mature buildings the lower end.
Cash, not in-kind
Always negotiate TIA as cash, not as 'landlord-built-out' delivery. Cash gives the tenant vendor control, transparent pricing, and the ability to trade-off between line items. In-kind delivery lets the landlord mark up construction line items (typically 10–25%) and forces the tenant into the landlord's preferred contractor and consultants.
The one exception: very small fit-outs (under USD 50/sf budget) may benefit from in-kind delivery to avoid the overhead of running a separate construction contract.
Drawdown structure
TIA is drawn down on construction-progress milestones, typically: (1) 25% on lease commencement / construction start, (2) 25% on substantial completion of MEP, (3) 25% on substantial completion of finishes, (4) 25% on certificate of occupancy / final completion. Each draw requires lien waivers from the contractor and proof of payment.
Negotiate the drawdown schedule explicitly in the LOI. Landlord-friendly schedules back-load the draws (10/20/30/40); tenant-friendly schedules front-load (40/30/20/10). Front-loaded helps cash flow; back-loaded protects the landlord against tenant default mid-construction.
Excess TIA and the amortisation trap
If the tenant's fit-out budget exceeds the TIA cap, the excess can be (1) paid by the tenant in cash, or (2) amortised into rent at 6–8% interest over the lease term. Amortised excess TIA is contractually rent and is owed even on early termination unless explicitly carved out.
The trap: spending USD 200/sf with USD 100 TIA cap and amortising the excess looks like a USD 14/sf/year rent uplift. Over 10 years that is USD 140/sf — a 40% overrun on the 'free' fit-out. Always model excess-TIA amortisation as rent in your effective-rent comparison.
TIA bundling with abatement and rent
Landlords trade between TIA, free-rent abatement, and headline rent. A landlord protecting a high headline rent (for asset-value reasons) will offer larger TIA and abatement; a landlord with rent flexibility may offer rent reduction in exchange for lower TIA.
Model the trade-offs in effective-rent terms. A USD 25/sf TIA increase typically equates to USD 2.5–3.5/sf/year of rent reduction at present value. Push the landlord to the structure that maximises tenant present-value, not the structure that minimises landlord book-value.
Permitted use of TIA
TIA is typically restricted to 'tenant improvements' — interior demising, MEP, finishes, ceilings. Negotiate carve-outs to extend TIA to (1) AV/IT cabling and equipment, (2) FF&E (furniture, fixtures, equipment), (3) consultants (architect, engineer, project manager), (4) move costs and decommissioning of old space.
The tighter the permitted-use definition, the lower the effective TIA. A USD 100/sf TIA limited to 'hard construction only' is materially less valuable than the same USD 100/sf permitting AV/IT, FF&E, and consultants.
TIA tax treatment
Under US GAAP and IRC § 110, TIA used for qualified leasehold improvements is generally not taxable income to the tenant if structured correctly (typically as a true allowance against fit-out cost, not as cash to the tenant). Bring tax counsel into the LOI to confirm structure; the wrong drafting can convert TIA into taxable income.
Decision aid
If you are negotiating a US Class A lease: target USD 80–150/sf TIA for 7–10 year terms, structure as cash with front-loaded drawdown, expand permitted use to AV/IT and FF&E, model excess-TIA amortisation as rent in your effective-rent comparison, and confirm tax treatment with counsel before signing.
Frequently asked questions
How much TIA is typical?
USD 80–150/sf for 7–10 year US Class A. Trophy and longer terms reach USD 150–250/sf.
Cash or in-kind?
Cash, almost always — gives vendor control and prevents landlord markup.
How does excess TIA amortise?
Typically into rent at 6–8% interest over the lease term. It is contractually rent and owed even on early termination unless explicitly carved out.
Can TIA cover FF&E?
Negotiate it explicitly. Default lease language often restricts to hard construction; expand to AV/IT, FF&E, and consultants.
Is TIA taxable?
Typically not under IRC § 110 if structured correctly. Always confirm with tax counsel before signing.