Commercial Guide · Updated April 15, 2026
Commercial Tenant Improvement Guide: TI Costs & Process (2026)
By the Bay Area Realty & Construction team — licensed contractor, realtor & lending desk in Sunnyvale, CA.
A tenant improvement project is three negotiations wearing a construction hat: tenant vs. landlord on who pays, design vs. code on what's required, and schedule vs. rent commencement on who wins. Tenants who walk in understanding all three consistently get more allowance, fewer surprises, and earlier move-ins. Here's the complete picture.
What TI costs in 2026
| Space Type | Scope | Cost / Sq Ft |
|---|---|---|
| Office (2nd gen) | Paint, carpet, lighting, minor walls | $80 – $150 |
| Office (reconfigure) | New walls, HVAC zones, power, finishes | $150 – $250 |
| Retail | Storefront, finishes, fixtures-ready | $100 – $250 |
| Medical / dental | Exam plumbing, equipment coordination | $200 – $400+ |
| Restaurant / food service | Kitchen infrastructure, health code | $200 – $500 |
TI allowances: how the money side works
The landlord's TI allowance ($/sq ft toward your buildout) is purchased with lease term and rate — a 7-year lease earns allowance a 3-year lease doesn't. 2026 South Bay office deals commonly carry $40–$100+/sq ft; retail varies widely; second-generation space trades allowance for lower rent. Three negotiation rules: (1) know your real buildout cost before negotiating — that's what our pre-lease evaluation provides; (2) negotiate the disbursement mechanics (draw schedule, lien-release format, deadlines) as hard as the amount, because allowances that pay out late are construction loans you're making to your landlord; (3) get unused-allowance treatment in writing (rent credit vs. forfeit).
The code triggers tenants don't budget
- ADA path of travel: any permit triggers accessibility upgrades — parking to entrance to restrooms — up to 20% of project cost for smaller projects (full compliance above thresholds). Older buildings hide $15K–$60K here.
- Title 24 energy: touch the lighting or HVAC and the new work must meet current energy code — controls, sensors, efficiency. Add 10–20% to those trades.
- Seismic: some structural changes trigger evaluation of existing-building elements.
- Fire/life safety: occupancy changes (office → assembly, retail → restaurant) can require sprinkler, alarm, and exiting upgrades that reprice the whole project — verify before signing.
The TI process and timeline
| Phase | Duration | Key Output |
|---|---|---|
| Pre-lease evaluation | 1–2 weeks | Real budget → lease negotiation ammunition |
| Space plan + work letter | 2–4 weeks | Scope aligned to allowance |
| Construction documents | 3–6 weeks | Permit-ready drawings |
| Permits | 4–12 weeks | City approval (parallel with procurement) |
| Construction | 8–20 weeks | Built space, inspections passed |
| Closeout | 1–2 weeks | C of O, allowance draw package, as-builts |
Want these numbers for your actual property?
Guides frame the decision — your parcel, space, or home decides it. Estimates, feasibility checks, and consultations are specific to your property — not internet averages.
Frequently Asked Questions
Who manages the TI — landlord or tenant?+
Both models exist. Turnkey (landlord builds to an agreed plan) shifts schedule risk to the landlord but limits your control and transparency. Tenant-managed with allowance reimbursement gives you control of design, contractor, and quality — the standard choice when the space matters to your operations. We work both sides and will tell you which your lease draft actually gives you.
What's a typical TI allowance in the South Bay in 2026?+
Office: $40–$100+/sq ft on 5–10 year terms, more in soft submarkets and for credit tenants. Retail: $20–$75. The allowance is one lever among several — free rent during construction is often worth more than marginal allowance dollars. Negotiate the package, not the line.
Can I occupy part of the space during the buildout?+
Sometimes, with phasing — common in office expansions and renovations of occupied suites. It adds cost (temporary walls, after-hours work, phased inspections) but avoids double rent. We design the phasing plan into the permit set when it pays.
What happens to improvements when the lease ends?+
Default: they become the landlord's. Negotiate now for what matters — removal obligations (landlords can require you to demolish specialty improvements at exit; cap this in the lease) and ownership of movable items like equipment and demountable partitions.
Related Services & Guides
Tenant Improvements
From signed lease to open doors: TI buildouts scoped to your allowance, permitted fast, an…
Commercial Construction
Office, retail, medical, and mixed-use construction delivered on the only schedule that ma…
Restaurant Construction
Health-department-ready kitchens, dining rooms that seat revenue, and an open date you can…
Construction Permits
Complete plans, clean submittals, fast corrections — the difference between a 3-week permi…
Ready to start your project?
Honest numbers and one team from purchase to construction. Tell us what you're planning — we respond within one business day.
Licensed · Bonded · Insured · CSLB #1056408 · Serving all of Silicon Valley