Commercial Tenant Improvement (TI) Estimating: Build-Out Pricing, Allowances, and Winning Bids

Commercial tenant improvement (TI) is the interior build-out of leased commercial space to make it usable for a specific tenant's purposes. A landlord leases an empty shell or previously-used space to a new tenant; the TI contractor builds out the interior to the tenant's specifications — offices, exam rooms, restaurant kitchens, retail fixtures, whatever the tenant's business needs. Typical TI cost ranges (2026 US averages, per square foot of finished space): - Basic office: $50-85/sqft - Premium office (law firm, executive suite): $100-200/sqft - Medical office / dental: $150-300/sqft (requires specialized plumbing, HVAC, finishes) - Restaurant (full buildout): $200-500/sqft (kitchen equipment, grease traps, hood systems, MEP heavy) - Retail (white box to finished): $75-150/sqft (varies with lighting, fixtures, POS infrastructure) - Gym/fitness: $80-150/sqft (rubber flooring, MEP, shower rooms) - Salon/spa: $100-200/sqft (plumbing-heavy, ventilation requirements) - Light industrial/warehouse TI: $40-80/sqft (usually simpler, concrete floors, less finish) - Lab / cleanroom: $300-1,000+/sqft (highly specialized) These ranges assume a relatively standard buildout; custom finishes, high-end materials, or unusual design requirements push prices higher. A 3,000 sq ft dental office TI typically runs $450,000-900,000 all-in. The key insight for general contractors moving into TI work: you are not just building — you are navigating a three-party transaction between landlord, tenant, and yourself. The scope of work, payment terms, and allowances are typically pre-defined in the lease agreement, and your estimate must align with those constraints or the deal falls apart before construction begins.

A TIA (tenant improvement allowance) is a dollar amount the landlord provides to the tenant to pay for build-out. TIAs are negotiated during the lease and are usually expressed as dollars per rentable square foot. Typical TIA structures (market norms in 2026): - Class A office: $50-100/sqft TIA on a 5-10 year lease - Class B office: $20-60/sqft TIA on a 3-7 year lease - Medical office: $50-150/sqft TIA (landlords like medical tenants because they sign long leases) - Restaurant: $50-200/sqft TIA (landlords offer more because the tenant is spending heavily on FF&E) - Retail (in a mall or anchored center): $20-75/sqft TIA The TIA is paid either directly to the contractor (landlord disburses against draw requests) or reimbursed to the tenant (tenant pays upfront and gets reimbursed from landlord). Contractors prefer direct-to-contractor TIAs because payment is certain; tenants prefer reimbursement structures for cash flow reasons. Critical estimating implication: your contract scope must match what the TIA allows. A TIA that funds 'demising walls, electrical, plumbing, HVAC, flooring, paint' does NOT fund 'kitchen equipment, security system, furniture, signage.' These latter items are tenant-out-of-pocket and need to be clearly separated in your bid. A contractor who includes out-of-scope items in the main contract often finds the tenant struggling to pay, delayed draws, and accumulating owed amounts. Best practice: request the executed lease (or the TI work letter — a document that defines the scope and allowance) before submitting a bid. This shows you what's funded vs what's out-of-pocket. Bid the TIA scope as the main contract; bid extras (furniture, FF&E, technology) as separate optional contracts. Transparency in scope split builds trust and prevents billing disputes.

Office TI is the most common type for general contractors entering commercial work. Typical scope: Demolition: $3-8/sqft (remove existing walls, carpet, ceiling tiles, MEP that doesn't match new layout) Demising walls (walls between tenants): $25-40/linear foot for metal stud + drywall construction Interior partitions: $20-40/linear foot for metal stud + drywall, $5-10/linear foot additional for sound insulation Ceilings: $4-7/sqft for acoustic tile with new grid; $6-12/sqft for architectural drywall ceilings Flooring: - Carpet tile: $4-8/sqft installed - Luxury vinyl tile (LVT): $5-12/sqft installed - Polished concrete: $6-15/sqft (may include existing floor if suitable) - Wood or laminate: $8-15/sqft installed Painting: $1-3/sqft of wall area with 1-2 coats premium latex Electrical: $8-18/sqft for typical office circuits, receptacles, data/telecom rough-in Lighting: $3-8/sqft for LED troffers; $5-15/sqft for architectural lighting HVAC: $10-25/sqft depending on existing system and whether new zones are needed Plumbing: minimal for office unless adding kitchens or additional restrooms ($2-8/sqft average for modest plumbing) Doors and frames: $500-1,500 each installed (including hardware) Millwork (reception desks, break room cabinets, conference room credenzas): $3,000-15,000+ per element Final cleaning and protection: $1-2/sqft For a 5,000 sq ft office TI, middle of each range: Demolition: $25,000 Partitions and demising: $40,000 Ceilings: $27,500 Flooring: $35,000 Painting: $20,000 Electrical: $60,000 Lighting: $25,000 HVAC: $75,000 Plumbing: $20,000 Doors: $15,000 Millwork: $25,000 Cleanup: $7,500 Subtotal: $375,000 Overhead/profit @ 15-25%: $56,250-93,750 Total range: $431,000-469,000 (approximately $86-94/sqft) This matches typical office TI pricing in most major markets. Your local market may run 20-40% higher (dense urban) or 10-20% lower (rural/suburban). Build your own pricing index based on your last 5-10 jobs.

Specialty TI commands premium pricing but requires specialized knowledge and subcontractor relationships. Medical office TI: $150-300/sqft Additional requirements beyond standard office: - Medical plumbing: sinks in every exam room, sterilization equipment, eye wash stations - Specialized HVAC: higher air changes per hour, HEPA filtration, negative pressure rooms (dental ops especially) - Lead-lined walls (dental/x-ray rooms): adds $150-400 per sqft of lead-lined wall - Oxygen and nitrous oxide piping (dental): specialty trade - Accessibility: ADA compliance for exam rooms, wider doorways, accessible restrooms - Casework: dental/medical cabinetry at $5,000-25,000+ per exam room - Finishes: antimicrobial finishes, resilient flooring (no carpet in exam rooms), seamless transitions Restaurant TI: $200-500/sqft Critical systems for restaurants: - Type I hood system (cooking): $25,000-80,000 including ducting, make-up air - Grease trap: $3,000-15,000 depending on size and connection - Commercial kitchen plumbing: $15,000-50,000 - Heavy-duty electrical: walk-in cooler (requires dedicated 220V), grill circuits (often 240V 3-phase), dishwasher, heat lamps - Walk-in cooler/freezer: $15,000-40,000 including installation - Equipment hookups (oven, fryer, dishwasher): $5,000-15,000 per piece - ADA restroom compliance: critical for health dept approval - Custom millwork: host stand, bar, servers station Retail TI: $75-150/sqft Retail-specific elements: - Display lighting: track lighting, accent lighting, feature wall lighting - Fixtures: slat walls, gondolas, display islands - POS infrastructure: data drops, electrical for registers, security systems - Storefront glass: high-impact glass for mall/strip center locations - Dressing rooms: ADA compliant, locking doors, mirrors - Back-of-house: receiving, stock room, employee restroom Each specialty requires subcontractor relationships that general office contractors may not have. Before bidding medical, restaurant, or lab TI, verify you have trusted subs who've done this work type. Trying to learn it on the job costs money and damages reputation.

Understanding who pays for what is central to TI bidding. The scope split is usually defined in the lease or work letter, but common divisions: Landlord responsibility (part of the base building, not TI): - Building structure, roof, exterior walls, foundation - Exterior windows and storefront - HVAC to 'base building' condition (supply and return in common corridors) - Fire sprinkler main distribution - Common area bathrooms in the corridor - Parking lot and landscape - Elevators, stairs, common area lighting Tenant responsibility (within the TI scope): - Interior walls, doors, frames - Finishes: flooring, paint, ceilings - Lighting (except base building emergency lighting) - Electrical branches from the main panel to outlets/equipment - Data and telecom rough-in and cabling - Plumbing within the tenant space (sinks, break rooms, specialty plumbing) - HVAC branching from main trunk to diffusers within the space - Tenant's signage (both on-premises and exterior — usually requires landlord approval) - Fixtures, furniture, equipment (usually not contracted to the GC at all) Gray areas that need lease clarification: - Exterior signage (often requires landlord design approval even if tenant pays) - HVAC upgrades if the base system can't handle tenant load - Fire alarm modifications beyond base building - Security systems (card access often affects landlord's system) - Roof penetrations (kitchen hood exhaust, tenant-specific equipment) Always ask the tenant or tenant's broker to get clarity on the scope split BEFORE you bid. Many first-time TI contractors discover mid-project that the landlord expects the tenant to pay for HVAC upgrades that the tenant expected would be included in the landlord's scope. Resolving this 30% through construction is painful and often means someone is eating the cost. The work letter (separate document attached to the lease) is the definitive scope document. Review it line by line. Ambiguity at signing becomes dispute at closing.

TI work in occupied buildings has constraints that ground-up doesn't: After-hours work: Most landlords require noisy work (demolition, concrete cutting, loud drilling) to be done evenings/weekends when neighbors aren't occupied. Budget 20-40% premium for after-hours labor. Specify in your bid that all noisy work is priced for after-hours execution. Noise and vibration restrictions: Some tenants (medical offices, law firms, recording studios) cannot tolerate normal construction noise even during business hours. You may need to use quieter construction methods (hand-cutting instead of saws, lightweight partitions) which cost more. Dust and containment: Sharing HVAC with other tenants requires dust containment. Standard construction areas need temporary plastic barriers, negative air machines, and foot traffic control. Budget $1-3/sqft for dust mitigation on shared-HVAC jobs. Elevator access: Hauling material through passenger elevators is slow, expensive, and often restricted to certain hours. Some buildings have freight elevators; others don't. If the building has no freight elevator, all material must go up passenger elevators — budget significantly more labor hours. Parking and material staging: Where do crews park? Where do you stage materials? Some buildings have no loading dock and no staging area, which means just-in-time delivery every day — a logistics nightmare that adds 10-20% to labor costs. Working around other trades: In a busy office building, multiple contractors may be working on different floors. Coordination meetings with the landlord, other contractors, and building management are essential. This overhead is often overlooked in first-time TI bids. Shared-system impacts: Cutting into HVAC, fire alarm, or fire sprinkler systems affects the entire building. Every cut requires coordination with building engineer, fire watch during cuts, and test-and-balance afterwards. Budget significantly more time for MEP modifications in occupied buildings compared to ground-up or fully vacant buildings. Price these factors into your bid explicitly. A tenant who receives a $300/sqft bid versus a $225/sqft bid needs to understand that the higher number accounts for real constraints of the building, not padding.

Commercial TI bids differ from residential bidding in process and paperwork: Typical bid timeline: - Tenant broker issues RFP to 3-5 contractors: day 0 - Pre-bid walkthrough scheduled: day 3-10 - Bids due: day 14-28 - Contractor selection: day 30-45 - Contract executed: day 45-60 - Permit submission: concurrent with contract execution - Construction start: day 60-90 The pre-bid walkthrough is critical. Show up on time, ask substantive questions, take photos and measurements. Walk the path of material delivery from street to space. Identify potential issues (old wiring in walls, plenum-rated cable, existing unusable HVAC). Ask about after-hours access, elevator scheduling, parking. What tenants and brokers look for in bids: - Detailed line-item pricing (not lump sum — they need to compare) - Schedule (how long will this take?) - References and similar-project examples - Subcontractor qualifications (especially for specialty trades) - Insurance certificates (commercial liability, workers comp, umbrella) - Licensing proof (commercial general contractor license for the jurisdiction) - Clear inclusions and exclusions - Payment terms (bonded? liens? progress payments?) Winning strategies: - Demonstrate commercial TI experience specifically (not just residential) - Emphasize predictability and schedule reliability over lowest price - Reference similar projects by type (medical, restaurant, office) - Present clean, professional documents — sloppy bids lose to better-looking bids even at higher prices - Offer value engineering alternatives proactively - Include a clear schedule with milestones Avoid: - Lowball bids that assume landlord will pay for extras - Ambiguous language about scope - Missing insurance or licensing documentation - Hand-written estimates or unprofessional presentation - Contingencies hidden in overhead rather than line items This content is for educational purposes only and does not constitute legal advice. Commercial construction contracts vary significantly by jurisdiction — always have contracts reviewed by a construction attorney before executing.