Your TI gap is the build-out cost minus the landlord's allowance. At the Alithos model's $170 per square foot, a 2,500 sq ft suite is $425,000 of construction, plus $42,500 of cabinetry. With an example $50 per square foot allowance ($125,000), you fund $342,500. Amortized TI is not free: it comes back in rent, with interest.
How much of the build-out will the TI allowance cover?
Enter your suite size, a construction rate and the allowance on the table. The defaults are example inputs. The $170 and $220 presets are the standard and premium lease rates the Alithos estimator assumes. They are planning assumptions, not a contractor's bid. Results update as you type.
Excludes equipment, imaging, soft costs and working capital. This is not a project budget. Planning math, not a quote.
The gap payment uses the estimator's planning assumption of a 15-year loan at 8.25%. It is not a rate quote. For other rates and terms, use the dental loan payment calculator. To size the suite from operatories first, use the operatory square footage calculator. The Alithos estimator assumes 500 sq ft per operatory for 3 to 5 ops, so 2,500 sq ft fits a 5-operatory plan.
What is a TI allowance?
A tenant improvement (TI) allowance is money the landlord agrees to contribute toward building out your suite. It is written into the lease, usually as a dollar figure per square foot, and the details live in an exhibit called the work letter.
For a dental tenant, the allowance matters more than for most office users. A dental suite needs plumbing to every operatory, vacuum and air lines, heavier electrical, and often radiation shielding for imaging where state rules require it. That makes the build-out expensive, and every dollar the landlord funds is a dollar you do not borrow.
How big are allowances? I have not found a primary survey. Published ranges for medical and dental tenants run from roughly $40 to over $100 per square foot and vary widely by market, term and building [1]. That is why the $50 default above is labeled an example. Your number comes from your lease, not from a chart.
What counts toward the allowance?
Only what the work letter says counts. Landlords write the definition of eligible costs, and the definition decides how far the allowance really goes. Here is how the main categories usually sort out. Treat it as a checklist of questions, not as rules.
| Cost | Usually eligible? | What to check in the work letter |
|---|---|---|
| Hard construction: walls, ceilings, finishes, HVAC, plumbing, electrical | Usually yes | Whether base-building work the landlord should pay for is being charged to your allowance |
| Soft costs: design, engineering, permits | Sometimes, often capped | Any cap on soft costs as a share of the allowance |
| Built-in cabinetry and millwork | Often, if permanently attached | Whether casework is treated as an improvement or as your property |
| Dental equipment, chairs, imaging | Usually no | Whether rough-ins for equipment (plumbing, electrical, vacuum lines) are eligible |
| Furniture, IT, signage | Usually no | Any allowance for cabling or signage written separately |
| Landlord fees | Charged against it, if the lease allows | Construction management or supervision fees taken out of your allowance |
The calculator's build-out figure is construction plus 10% for cabinetry, which is how the Alithos estimator models it. Equipment, imaging, soft costs and working capital sit outside it. On the model's 5-operatory standard lease plan, those other lines take the total project to about $933,500 at the point estimate [2]. The allowance touches only part of that. For the full picture, see the dental office build-out cost guide.
Straight TI vs. amortized TI: what is the difference?
Straight TI is the landlord's contribution, priced into the rent you were already going to pay. Amortized TI is extra money on top, repaid through a rent add-on with interest over a set term. Amortized TI is a loan inside your lease.
Here is a worked example. Start with the default suite: a $467,500 build-out and $125,000 of straight TI. Then suppose the landlord offers another $50,000 of amortized TI at 9% over 10 years. Both the rate and the term are example inputs. Amortized TI carries its own interest rate, so ask for the landlord's.
| Line | Straight TI only | Plus $50,000 amortized TI |
|---|---|---|
| Gap you borrow | $342,500 | $292,500 |
| Bank payment on the gap (8.25%, 15 yr) | $3,323/mo | $2,838/mo |
| Rent add-on (9%, 10 yr) | $0 | $633/mo |
| Combined monthly cost, years 1 to 10 | $3,323 | $3,471 |
| Interest on the $50,000 itself | $37,313 if borrowed from the bank over 15 years | $26,005 over 10 years |
Read it both ways. The amortized option costs about $148 more a month for ten years, because the term is shorter. It also costs less total interest on that $50,000. Neither is automatically better. The questions that decide it are the rate, the term, whether the add-on escalates with base rent, and what happens to the unpaid balance if you leave or the lease ends early. Have your attorney review those terms before you sign. Run your own version by entering an amount in the amortized TI field above.
How is TI paid out?
Most allowances are reimbursements, not deposits. The work letter sets the conditions, and they commonly include:
- Completed work, sometimes paid in stages as phases finish, sometimes in one payment at the end
- Paid contractor invoices and lien waivers from the contractor and major subcontractors
- A certificate of occupancy or the local equivalent
- Final drawings and, in some leases, proof the practice has opened
- A deadline: allowance not claimed by a set date may be forfeited
The timing gap is where startups get squeezed. If the landlord pays after completion, someone has to pay the contractor in the meantime. That usually means your construction loan or your cash. Ask your lender how it handles a TI reimbursement, and build the timing into your plan. For loan types and terms, see the dental practice financing guide.
How do you negotiate more TI?
Negotiate from a budget. A landlord takes a request seriously when it is tied to a priced build-out, not to a number someone heard. Run this calculator first, so you know the gap at the allowance offered and at the allowance you want. Each $10 per square foot on a 2,500 sq ft suite is $25,000, or about $243 a month on a 15-year loan at 8.25%.
Then trade with the whole lease in view. A bigger allowance can come back as higher base rent or a longer term. Free rent during build-out, a soft-cost cap that fits your design fees and a clear deadline to claim the allowance are all worth asking about. I cover the negotiating side in tenant improvement allowances: negotiating the landlord's money, and the wider lease picture in the dental office real estate guide.
I am not a real estate broker or an attorney, and I do not negotiate leases for you. What I do is build the budget that tells you what the allowance has to be for the deal to work. Your broker and attorney carry that number into the negotiation.
If you are comparing suites, the Feasibility Check ($2,500 flat, credited toward the Budget Plan) screens space and site fit and runs a DSCR pre-check against the 1.25x standard. The Budget Plan ($7,500 to $10,000, flat fee, scope in writing) builds the line-item budget and the build vs. lease vs. condo projections. For a first pass at the whole project, run the cost estimator.
TI allowance questions dentists ask
How much TI allowance should I ask for?
Ask from your budget, not from the landlord's first number. Price the build-out first, then decide how much of it you want the landlord to fund. Published ranges for medical and dental tenants run from roughly $40 to over $100 per square foot and vary widely by market, term and building, so there is no single right figure.
Can a TI allowance pay for dental equipment?
Usually not. Allowances are typically written for permanent improvements to the space, and dental chairs, delivery units and imaging are movable equipment you own. Some work letters do allow plumbing, electrical and other rough-ins for equipment. Read the work letter's definition of eligible costs before you count on anything.
What is amortized TI?
Amortized TI is extra build-out money the landlord advances and you repay through higher rent, with interest, over the lease term. It is a loan inside your lease. Compare its rate and term with your bank's before you accept it, and check what happens to the unpaid balance if the lease ends early.
When does the landlord pay the TI allowance?
Whenever the lease says. Work letters commonly tie payment to completed work and paperwork, such as invoices, lien waivers and proof of occupancy, so many tenants pay contractors first and get reimbursed later. Plan bridge cash or construction financing for that timing gap.
Is the TI allowance taxable?
It depends on the lease structure, mainly who owns the improvements. Federal law also has a narrow exclusion in Internal Revenue Code Section 110 for certain allowances on retail-space leases of 15 years or less. This is general education, not tax advice. Confirm the treatment of your allowance with a CPA before you sign.
Does a bigger TI allowance mean higher rent?
Often it does. The landlord gets its money back somewhere: a higher base rent, a longer term, fewer concessions elsewhere, or amortized TI. Compare whole offers over the full term, including total rent, not the allowance figure alone.
On the tax question, the statute is 26 U.S.C. § 110 [3]. How improvements are depreciated, including qualified improvement property, is covered in IRS Publication 946 [4]. Both are for your CPA conversation, not a substitute for it.
Have a lease offer and want to know if the allowance is enough? Book a free Project Fit Call and we will run the gap on your numbers. More tools are on the calculators page.
Sources
- Terrapin Construction Group, "Medical Office Tenant Improvement Cost Per Square Foot" (2026). Contractor-published ranges; not a survey. terrapincg.com
- Alithos Advisory, cost benchmark and estimator assumptions (2026). Planning assumptions, not survey data. alithos.co
- Legal Information Institute, Cornell Law School, 26 U.S. Code § 110, "Qualified lessee construction allowances for short-term leases" (accessed 2026). law.cornell.edu
- Internal Revenue Service, Publication 946, "How to Depreciate Property" (2025). irs.gov
Every figure on this page comes from a cited source or is labeled as an Alithos planning assumption. How we research and update this page.