Tenant Improvements Unpacked





For many in the real estate and construction industries, the abbreviation “TI” (aka tenant improvement(s)) is a commonly used acronym. But if your day-to-day is not in real estate or commercial construction, you may be wondering, what exactly are TIs and what is a TI Allowance?


What is a tenant improvement?

When leasing commercial space, it is customary for the tenant to have unique requirements or upgrades to the rental space so that it meets their business requirements. These customized changes are called tenant improvements. This may include adding walls, changing finishes such as flooring, upgrading lighting, or adding specialty items such as cabinetry or displays.


What is a TI Allowance?

The allowance is a fixed amount that is calculated as a per-square-foot number that the landlord gives to the tenant to offset the cost for the space modifications for things described above, i.e., carpet, paint, ceiling tile, etc. This allowance is determined during lease negotiation along with the understanding by the parties of what it can and can’t be spent to fund. Items such as furniture, equipment, or moving expenses are typically not covered under the TI Allowance. It is also important to note, that this allowance does not need to be repaid back but it will be determined in part by the size of the lease space and the term of the lease.


Workplace TI Trends

Welsh has completed over 30 million of square feet of interior buildouts in every sector of commercial real estate market since the late 70’s. Consequently, we have seen many trends come and go but what is emerging post-pandemic encompasses a dramatic shift. And now that companies are encouraging and, in some cases, requiring employees back into the workspace, there have been a few trends emerging that are taking a firm hold:

  • More flexible relaxing space – Minimizing or eliminating assigned seats in favor of address-free offices and desks (aka no assigned seating) has been around for several years, and we see no sign of this trend cooling off. If you need to have a private call or virtual meeting, just jump into a privacy pod for some heads down time. Remaining spaces seem to be morphing as collaborative areas change to lounge areas and breakrooms have now a café vibe with upgraded finishes and appliances. This shift to more of a “resi-mercial” design transforms an office into more of a home with living rooms areas and lots of cozy nooks.

  • More outdoor amenities – These areas include roof gardens with lounge furniture, outdoor coffee bars, and eating spaces.

  • Sustainability – Environmentally friendly buildings, healthy food options, healthy air and water are just a few things that are addressed in WELL certified buildings.

  • LWP (Live Work Play) Neighborhood Amenities – This idea can be thought of in two ways: the location of the workplace with prime locations being those near parks, restaurants, retail, and transportation hubs; or residential properties that incorporate co-workspaces along with entertainment or workout amenities in their facilities.



Change will continue in tenant improvements for the foreseeable future as employers compete with no-commute work from home and enticing team members into the workplace will mean upping the anti with cool spaces, amenities, and lots of flexibility.


If your company looking to change their workspace and need an updated tenant improvement, contact us here to learn how Welsh Construction can meet and exceed your needs!








MEGHAN HUBER


President, Welsh Construction