A tenant improvement (TI) allowance is the money a landlord provides for a tenant to build out or improve its space.
TI allowances are most common in new leases and renewals. They are typically stated per square foot, and the lease explains how and when the tenant can draw on them. For an investor buying an existing lease, check whether the landlord has any unpaid TI obligations, because they can transfer with the property. Unamortized TI costs can also affect value when a lease is renegotiated or the space is re-leased to a new tenant.