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Tenant Improvement Allowance

We created this guide to share the numbers we’re achieving for our dental clients, specifically, since they often have extensive buildouts – along with three tips for negotiating a Tenant Improvement Allowance.

So, let’s get to it.

But first, what is Tenant Improvement Allowance (TIA)? It’s a dollar-per-square-foot contribution from the landlord towards your build-out. It’s the single most negotiated economic term in any healthcare lease, and the one most tenants leave money on the table.

Now, for the numbers.

We typically achieve $40-50 per square foot on a 10 to 12 year lease. This is the realistic outcome for most healthy negotiations across SE Michigan submarkets.

For brand-new vacant buildings, you could expect $60 per square foot, because the landlord has empty inventory and is competing for tenants.

The best we’ve ever gotten is $110 per square foot, but that was a unique situation. The landlord had received an insurance payout on the space and had cash to deploy. We mention this because every now and then a special circumstance like this will exist, and you only find it if you ask.

For lease renewals, we’ll typically get $10-25 per square foot, but that could be more if you’re willing to commit to a longer extension, such as 7 to 10 years.

This information is helpful, but, what do dental buildouts cost in 2026? To know whether the TIA you’re being offered is enough, you’ll need to know what the buildout is going to cost.

New construction or shell conditions will be $140-200 per square foot for a full dental buildout, including operatory plumbing, vacuum, compressed air, X-ray rough-in with lead-lined walls, finished cabinetry, and all MEP. The number will be on the upper end of this estimate for premium finishes or for a specialty practice.

Second-generation dental space will be the least expensive at $20-30 per square foot for essentially just cosmetic improvements, including new paint, flooring, cabinetry refresh, lighting upgrades, signage. This is assuming all plumbing and operatory layouts will stay as-is.

Second-generation dental space with modified operatories or floor plan will be $40-80 per square foot, but this could be more. As soon as you move plumbing and add operatories, or change room sizes, the cost climbs fast. The exact number depends on how many ops you’re touching and whether the existing slab can accommodate the new layout.

General office space converted for dental use needs to be considered new construction, because they are full gut jobs, costing $140-200 per square foot. A standard general office space does not have proper plumbing for dentistry, vacuum lines, compressed air, higher electrical capacity, or other MEP infrastructure for dentists. Converting everything usually means a complete demolition. If a quote sounds too cheap, the contractor is probably underestimating the demo or slab work.

One more thing to note is if the building is a multi-tenant building, you can expect more scrutiny from the landlord due to the construction causing utility shutoffs and common area disruption throughout the process. These two factors alone will cause strategic scheduling (including after-hours) and more daily cleanups to be mindful of the other tenants at the property. Ensure you discuss these arrangements ahead of time and budget accordingly.

In summary, run those numbers against the TIA the landlord is offering. If the gap is too large with a long lease (10+ years), you’ll need to push for more before you sign anything or possibly walk away.

As for the tips –

1. Ask for a lot. Landlords don’t volunteer TIA; they respond to the number you put on the table. The opening number sets the ceiling for the whole negotiation.
2. Push for a “TI bank”. This means unused TIA can be contributed to other line items, such as free rent, equipment, or signage instead of being forfeited. Most landlords will agree when asked, but most tenants don’t ask.
3. Negotiate progress draws. If the TIA is paid as a reimbursement after construction, this can strain working capital. Therefore, we like to push for payments at different stages of construction, such as 30% at framing, 30% at Mechanical, Electrical, Plumbing (MEP) rough-in, and 40% at Certificate Of Occupancy COO).

And for more information similar to this, check out the Commercial Lease Concessions Explained article.