Tenant Improvement Allowance Calculator
Compare the cost of a commercial buildout with the landlord’s TI allowance, then see the cash due, any financed overage, and the resulting rent. You can also work backward from a monthly rent ceiling to a maximum buildout budget.
Monthly base rent plus TI$8,201.60
- Buildout cost including contingency
- $206,250.00
- TI allowance available
- $100,000.00
- Buildout shortfall
- $106,250.00
- Tenant cash applied
- $10,000.00
- Landlord-financed overage
- $96,250.00
- Monthly TI rent payment
- $1,951.60
- Annual TI rent adder per RSF
- $9.37
- Total interest on financed TI
- $20,846.18
- Maximum buildout budget at target rent
- $196,307.26
- Maximum pre-contingency buildout cost per RSF
- $71.38
Assumes equal month-end payments using a nominal annual rate divided by 12.
The target-rent calculation is omitted when the target monthly rent is zero.
How to use this calculator
- Enter the rentable area used by the lease for both the allowance and the rent.
- Enter the estimated buildout cost per RSF and a contingency for change orders or unknown conditions.
- Enter the TI allowance, planned cash contribution, and the landlord’s financing terms.
- Add the annual base rent to see the total monthly rent with financed TI.
- Enter a target monthly rent to see the largest buildout budget that fits beneath it.
How the TI allowance calculation works
A tenant improvement allowance is the portion of a commercial buildout that the landlord agrees to fund. This calculator starts with the rentable area because lease allowances and quoted rent are often stated per rentable square foot. It multiplies that area by the estimated buildout cost per RSF, then adds the contingency reserve.
buildout cost = rentable area × cost per RSF × (1 + contingency)
The available allowance is rentable area × allowance per RSF. The calculator uses no more allowance than the modeled buildout actually costs. Any difference is the shortfall. Planned tenant cash is applied next, but it too is capped at the shortfall. The balance becomes the landlord-financed overage.
How financed TI changes the rent
The financed overage is modeled as a level monthly payment over the selected amortization term. With principal P, monthly rate i, and number of months n, the payment is P × i ÷ (1 − (1 + i)^−n). The monthly rate is the stated annual rate divided by 12. At a 0% rate, the payment is simply principal divided by months.
The tool adds that payment to monthly base rent, calculated as rentable area × annual base rent per RSF ÷ 12. It also shows the annual TI rent adder per RSF, which can make proposals with different areas easier to compare. A shorter amortization term or a higher financing rate raises the TI payment; a larger allowance or cash contribution lowers it.
Working backward from a rent limit
When you enter a target monthly rent, the calculator first subtracts base rent. The remainder is the payment available for TI financing. It converts that affordable payment to a present value using the same rate and term, then adds the allowance and planned cash contribution. The result is the maximum all-in buildout budget. Dividing it by area and the contingency factor gives the maximum pre-contingency cost per RSF.
This is a planning model, not a lease abstract. It does not model construction draws, reimbursement timing, retainage, taxes, operating expenses, free rent, escalations, tenant default, or an early termination balance. The lease controls which hard costs, soft costs, fixtures, and change orders qualify for the allowance and whether any unused allowance has value.
Worked example
Suppose a tenant leases 2,500 RSF, estimates a $75 per RSF buildout, and carries a 10% contingency. The all-in buildout cost is $206,250. A $40 per RSF allowance provides $100,000, leaving a $106,250 shortfall. After $10,000 of tenant cash, the landlord finances $96,250.
At 8% annual interest for 60 months, the TI payment is $1,951.60 per month. With annual base rent of $30 per RSF, base rent is $6,250 per month, so the combined monthly base rent plus TI is $8,201.60. If the tenant’s target is $8,000 per month, the affordable TI payment is $1,750 and the maximum all-in buildout budget is $196,307.26, or $71.38 per RSF before contingency.
Common questions
What does a tenant improvement allowance cover?
The lease and its work letter define eligible costs. Depending on the deal, they can include construction, design, permits, project management, furniture, or technology, but some items may be excluded or subject to separate limits.
Is a TI allowance based on rentable or usable square feet?
Many commercial leases state both rent and the TI allowance per rentable square foot, but not all do. Use the area definition in the proposal for every per-square-foot input; mixing rentable and usable area will distort the result.
How is a TI overage amortized through rent?
The landlord can fund the overage and add a monthly payment to rent over an agreed term. This calculator uses a standard fixed-payment amortization; the actual lease may use a different rate, compounding convention, or payment schedule.
Should a tenant pay the buildout shortfall upfront or through rent?
Paying cash generally avoids financing cost, while amortizing preserves cash for other uses. Compare the total interest shown here with the value of keeping that cash and with any lease requirements for upfront funding.
Does unused TI allowance become cash to the tenant?
Usually it does not; an allowance is commonly a reimbursement cap for eligible work rather than a cash payment. Some leases permit reallocating unused funds to specified items, so the work letter is the controlling document.
How do the lease term and contingency affect the TI rent payment?
A shorter amortization term concentrates the same financed amount into fewer payments, which increases the monthly rent adder. A larger contingency raises the buildout budget and can create more shortfall unless the allowance or tenant cash also increases.