What a TI allowance is
A tenant improvement allowance is a negotiated landlord contribution toward approved improvements to the leased premises. The lease or work letter should define the amount, eligible costs, approval process, documentation, disbursement mechanics and what happens if the project costs more or less than the allowance.
Why healthcare buildouts require extra care
Medical and dental spaces can involve plumbing, electrical capacity, specialized HVAC, imaging, shielding, sterilization, medical gas, accessibility, life-safety requirements and equipment coordination. The allowance should be compared with a realistic project scope rather than with a generic office buildout.
Questions to resolve before relying on the allowance
- Is the allowance stated as a total dollar amount or dollars per square foot?
- Which design, permitting, construction, cabling, equipment or professional costs are eligible?
- Who controls the contractor and construction process?
- When is the money actually disbursed?
- Does the tenant have to fund costs first and seek reimbursement?
- What documentation and lien releases are required?
- What happens if the project exceeds the allowance?
- What happens to unused allowance?
- When does rent begin relative to construction and occupancy?
Compare TI with rent and term
A landlord may offer a larger allowance in exchange for a longer term or different rent structure. The practice should compare the full economics of the transaction, including recurring occupancy cost, escalation, free-rent periods, buildout exposure and the useful life of the improvements.
Second-generation space changes the calculation
An existing medical or dental buildout may reduce the amount of new work required. But reuse should be based on verified condition and fit. A lower construction budget can be more valuable than a larger TI allowance applied to a much more expensive raw-space project.
Who should confirm the construction numbers
Budget and technical assumptions should be confirmed by the appropriate architect, contractor, engineer, equipment vendor and other professionals. ClinicaMOB's role is to keep the real-estate comparison organized and make sure unverified assumptions are not mistaken for facts.