Concrete
Commercial tenant improvement and fit-out field guide
A tenant improvement turns a base-building shell into a finished tenant space on a schedule the lease fixes. The rent clock and the move-in date do not move, so the permit, the long-lead items, and the existing conditions are the real risks.
Direct answer
A tenant improvement, or fit-out, turns a base-building shell into a finished tenant space, an office, store, restaurant, or clinic, on a schedule the lease sets. The rent clock and move-in date are fixed, so the schedule, the long-lead items, and the permit are the real risks. The lease, the work letter, and the code and AHJ control.
Key takeaways
- A tenant improvement turns a base-building shell into a finished office, store, restaurant, or clinic on a schedule the lease fixes.
- The permit, the long-lead items, and unverified existing conditions are the three risks that most often blow a fit-out's date.
- A TI allowance is a per-square-foot ceiling paid as reimbursement; overage above the cap is the tenant's out-of-pocket money.
- Build the fit-out schedule backward from the lease move-in date through closeout, construction, permit, and long-lead release.
- No certificate of occupancy means no legal move-in; the fire marshal's life-safety sign-off is usually the critical closeout item.
What a tenant improvement is, and why the lease runs it
A tenant improvement, called a TI or a fit-out, turns a base-building shell into a finished tenant space: an office, a store, a restaurant, or a medical clinic. The shell is what the landlord delivers, and the fit-out is everything the tenant's business needs on top of it, the interior walls and ceilings, the lighting and power, the HVAC distribution, the finishes, and the casework. The companion interior demolition guide covers stripping an existing space back to that shell, and the millwork guide covers the casework that gives the space its brand.
The thing that runs the whole job is not the construction. It is the lease. The tenant signed for a move-in date and a rent commencement date, and those dates are fixed before the first drawing is finished. So the schedule is the deliverable, and the three things that threaten it are the permit, the long-lead items, and the existing conditions nobody verified. Hit the date and a plain fit-out is a success. Miss it and a beautiful one is a failure, because the tenant is paying rent on a space they cannot occupy.
The money runs on its own rails. The landlord gives a TI allowance in dollars per square foot, and a work letter splits who pays for what between the base building and the tenant scope. Manage the allowance against scope creep, verify the existing conditions and the base-building capacity, and close out to a certificate of occupancy on the lease date. The lease, the work letter, and the adopted code with the AHJ control every one of those calls.
Why does the lease drive the whole job?
The lease drives a tenant improvement because the rent clock and the move-in date are set before construction starts, and they do not move to suit the build. A retailer signs to open before the holiday season. A medical group signs to move out of a space whose own lease is expiring. The date is a business commitment with money attached, and the fit-out exists to hit it.
That changes how you run the job. On a ground-up building the schedule serves the work. On a fit-out the work serves the schedule. The critical path runs through the permit, the long-lead equipment, and any surprise in the existing conditions, and those are the three places a TI dies. Everything else, the framing, the finishes, the punch, can usually be crashed with more crews. You cannot crash a permit review or a switchgear lead time by throwing labor at it.
Read the lease for the dates that carry teeth. Rent commencement is when the tenant starts paying. Some leases set a fixed outside date with the landlord owing free rent or liquidated damages if delivery slips, and the work letter usually defines those terms. Know the dates cold before you build the schedule, because they are the finish line the whole job is measured against. The exact terms live in the lease and the work letter, so read the documents, not the rule of thumb.
What is a TI allowance?
A TI allowance is a fixed amount of money the landlord contributes toward the fit-out, almost always stated in dollars per square foot of leased area. The number varies widely with market, asset class, and lease term, commonly from the teens to over a hundred dollars per square foot, with medical and restaurant deals on long terms at the high end and second-generation retail at the low end. The lease defines the number, so the lease controls.
The allowance is a ceiling, not a budget. Spend under it on most deals and the savings revert to the landlord. Spend over it and the overage is the tenant's money, paid out of pocket. That asymmetry is why a fit-out that ignores the allowance early turns into a bill the tenant did not plan for. The allowance is also usually paid as a reimbursement after the work is done and lien waivers are in, not as cash up front, so the tenant or the GC carries the cost in the meantime.
Scope creep is what eats the allowance. The tenant upgrades finishes, adds a few offices, asks for a nicer storefront, and each change looks small until they add up past the number. Track committed cost against the allowance from day one, price every change before it goes in the field, and tell the tenant when a request crosses from allowance money into their own. The work letter spells out what the allowance can be spent on, and some leases bar it from soft costs or FF&E, so read it before you promise anything.
The work letter and what the landlord actually delivers
The work letter is the part of the lease that defines the construction deal: who builds what, who pays for what, what the landlord delivers as the base building, and what the tenant is responsible for on top of it. It decides where the money lands when a question comes up in the field, and the gaps in it cost real money, because anything not clearly assigned defaults into an argument.
The base-building definition is the heart of it. A cold dark shell is bare structure with no MEP, no demising walls, no ceiling, and no finished floor. A warm or gray shell adds rough-in services and the slab. A white box adds finished demising walls, a ceiling grid, basic lighting, primed walls, and HVAC brought to the space ready to tie in. A vanilla shell goes further with painted walls, a finished ceiling, distributed HVAC, and a working restroom. The further the shell is built out, the less the tenant scope, and the lease should say exactly which one the landlord delivers and in what condition.
Read the work letter line by line and find the gaps before you bid. The classic ones live on the seam: who brings power to the panel and who distributes it, who provides the restroom and whether it meets current accessibility code, who patches the roof when a new unit goes through it. Each gap is a change order waiting to happen. The lease and the work letter control, so when the field disagrees with the drawing, the documents settle it.
| Shell type | What the landlord delivers | What the tenant adds |
|---|---|---|
| Cold dark shell | Bare structure, no MEP, no demising walls, no ceiling or floor | Nearly everything inside |
| Warm / gray shell | Rough-in services and finished slab | Distribution, walls, ceiling, finishes |
| White box | Demising walls, ceiling grid, basic lighting, primed walls, HVAC to the space | Layout, finishes, casework, tie-ins |
| Vanilla shell | Painted walls, finished ceiling, distributed HVAC, working restroom | Brand finishes, casework, FF&E |
How do you verify the existing conditions?
You verify the existing conditions by getting into the space and measuring what is actually there, because the shell is never as drawn. The as-built drawings are a starting point and a hope, not a fact. Ceilings are lower than noted, columns are where the field put them and not where the plan shows, the slab is out of level, and the base-building services stub out somewhere other than the riser diagram says. On a second-generation space, what the last tenant left behind is its own survey.
This is where the interior demolition guide is the companion to this one. On most fit-outs the first real work is stripping the space back to the shell, and that demolition is also the investigation that tells you what you are dealing with: what is in the walls, where the structure actually runs, what the last tenant abandoned above the ceiling. A building old enough to renovate is old enough to hide asbestos and lead, so the hazmat survey comes before anyone opens a wall, which the demolition guide covers in full.
Verify before you bid, not after you sign the contract. Field-measure the space, open the ceiling to see the real plenum height and the existing services, and confirm the base-building systems are where and what the work letter promised. The surprise you find at demolition is a schedule and budget problem you can plan around. The surprise you find after the conductor is on order is a change order and a missed date.
The base-building systems the tenant taps into
A tenant improvement does not build its own utilities from scratch. It taps into the base-building systems the landlord provides: the HVAC, the electrical service, the sprinkler main, the domestic water and sanitary, and the telecom and data entrance. The fit-out extends and distributes those systems into the space, which means the first capacity question is whether what the building brings to the suite is enough for what the tenant is putting in.
The number to check early is capacity, because it is the one that cannot be solved with a change order in the field. A restaurant or a data-heavy office can need more electrical service than a vanilla shell was built to deliver. A tenant adding server rooms or kitchen equipment can exceed the cooling tonnage the base building allocated per square foot. The sprinkler system may need new heads and a hydraulic recalculation for the new layout and occupancy. When the demand exceeds the supply, the fix is a base-building upgrade, which is slow, expensive, and a question of who pays under the lease.
Confirm the available capacity against the tenant's actual load before the design is locked. Get the base-building electrical capacity at the suite, the HVAC tonnage allocated, the sprinkler design density, and the available data pathways in writing. Whether a shortfall is the landlord's cost or the tenant's is a lease question, and it is far cheaper to answer it on paper than to discover it when the equipment will not fit the service that exists.
What makes MEP coordination the hard part?
MEP coordination is the hardest part of a fit-out because the new mechanical, electrical, plumbing, and data all have to fit into the same tight ceiling cavity, above a grid that is often only a foot or two below the structure. The ductwork, the sprinkler branch lines, the conduit, the cable tray, the plumbing, and the light fixtures all compete for the same plenum, and on a TI that space is whatever the existing building left you, not a generous new floor-to-floor.
The failure mode is the clash: the duct main and the sprinkler main both designed for the same elevation, discovered when the sheet metal is already hung and the pipe will not fit under it. On a fit-out with enough complexity, coordinating the trades in a model before the work goes in earns its time, because the cost of moving a clash on a screen is nothing next to re-hanging duct in the field. Even without a full model, a coordination meeting that walks the tight areas, the corridor crossings, the spots over the kitchen or the server room, catches most of it.
Coordinate to the real ceiling height, not the design intent. Confirm the structure-to-grid dimension by opening the ceiling, lay the trades out against it, and sequence the install so the system with the least flexibility goes first. Ductwork and gravity-drain plumbing set the elevations because they cannot dodge. Conduit and cable bend around them. Get that order wrong and the trade that should have led ends up threading its work through everyone else's, slowly.
When do you pull the TI permit?
You pull the TI permit as early as the design allows, because it is a separate approval from the base-building permit and it is the long pole that most often blows the schedule. The landlord built the shell under its own permit. The fit-out needs its own, reviewed by the AHJ for the new layout, the egress, the fire and life-safety systems, the accessibility, and the occupancy. In a busy jurisdiction that review commonly runs several weeks to a few months, and you do not control the clock.
The review is about more than walls. The plan checker looks at the means of egress for the new layout, the fire alarm and sprinkler coverage, the accessibility of the path of travel and the restrooms, and whether the use and occupancy classification matches what the tenant is doing. An alteration to a primary function area can trigger an accessibility upgrade to the path of travel from the entrance, which catches tenants who thought they were only painting and moving walls. The fire marshal often reviews and inspects separately from the building department.
Get the permit moving before the design is fully finished where the jurisdiction allows it, and budget the review as a hard constraint on the schedule, not a formality. A permit that comes back with comments and a second review cycle is the normal case, not the exception, so plan for the round trip. The adopted code edition, the local amendments, and the AHJ control what the permit requires, so confirm the requirements with the jurisdiction, not from memory.
Long-lead items: order early or miss the date
Long-lead items are the single most common reason a fit-out misses its move-in date, because they are the parts you cannot expedite once you are behind. Electrical switchgear, distribution panels, and bus duct have run from many months to most of a year on lead time in recent markets. Packaged HVAC units and rooftop equipment that used to take weeks have stretched to several months. Custom glass and storefront, specialty lighting, and custom millwork all carry their own queues. The millwork guide covers the casework itself, but the lesson here is the order date.
The trap is ordering on the old schedule, where procurement followed permit. On a fit-out with a fixed lease date, the long-lead items have to be identified and released early, often before the permit is in hand, because the lead time is longer than the time you have. That means committing money before every detail is final, which is a risk, but a smaller one than a switchgear that arrives after the tenant was supposed to open.
Build a procurement log on day one and work backward from the move-in date. List every long-lead item, its lead time, and the latest date it can be ordered and still arrive in time to install. Bring the GC and the major trades in during preconstruction so the equipment can be released against deposits while the design finishes. The items that drive the schedule are usually the switchgear and the HVAC, so those get ordered first, and the date they ship is a date you protect like the move-in itself.
The schedule tied to the lease
The fit-out schedule is built backward from the lease date, not forward from the notice to proceed. You start at the move-in or rent-commencement date the lease fixes, subtract the time for closeout and the certificate of occupancy, then the construction, then the permit, then the long-lead items, and what is left at the front is how much design time you actually have. On most office and retail fit-outs the whole run from a signed lease to opening is a matter of months, not a year, and that compression is the defining feature of the work.
The critical path on a TI runs through three gates more than through the construction itself: the permit, the long-lead procurement, and any base-building work the fit-out depends on. Float lives in the finishes and the punch, where more crews can recover lost days. There is no float in a permit review or a switchgear lead time. Manage those three and you manage the date.
Phasing buys time when the space is large. Get the back-of-house or the build-heavy areas permitted and started while the tenant finalizes the front-of-house, and overlap the trades that can work without colliding. Where the lease carries liquidated damages or a free-rent penalty for late delivery, the schedule is not just a plan, it is the money, so track it against the lease milestones and the work letter, which define what late actually costs.
Fast-track and design-build on a fit-out
Fast-tracking means overlapping the phases that would normally run in sequence: starting demolition and long-lead procurement while the design is still being finished, and beginning construction on the permitted parts while later packages are still in review. On a fit-out the schedule rarely allows the clean design-then-bid-then-build order, so some overlap is the norm rather than the exception. The risk you take on is that an early decision gets undone by a later one, and you pay for the rework.
The way to fast-track without getting burned is to lock the decisions that downstream work depends on before you start that work, and to leave the genuinely flexible choices for later. The structure, the MEP routing, the equipment sizing, and the permit set have to be settled early because everything keys off them. Wall colors and the exact furniture can wait. Release the long-lead order and the rough-in against a design that is firm where it counts, and the overlap saves weeks. Start hard work against a design still in flux and the overlap costs you those weeks back in rework.
Design-build, where one entity carries both the design and the construction, fits a fit-out well for this reason. It collapses the handoff between the architect and the builder, lets procurement start sooner, and puts the schedule and the budget under one roof. The lease date and the allowance still govern, so the contract has to tie the design-builder to both.
Finishes, millwork, and the tenant's brand
The finishes and the millwork are where a fit-out stops being generic construction and becomes the tenant's space. The flooring, the wall finishes, the ceiling treatment, the lighting character, and above all the casework and millwork carry the brand: the retailer's look, the restaurant's atmosphere, the firm's front-of-house impression. This is the part the tenant sees and the part they care most about, even though it is rarely what threatens the schedule.
The millwork is usually the longest-lead and highest-touch of the finish scope, which is why it has its own guide. The reception desk, the retail fixtures, the conference casework, and the feature walls are custom shop work built to a specified grade, and they need a field-verified set of dimensions before the shop builds, because they get scribed to a building that is out of plumb and out of level. Coordinate the blocking for that casework before the drywall closes, which the millwork guide covers, because an anchor point missed at framing is a problem discovered at install.
Hold the finish selections to the schedule the long-lead items demand. The tenant wants to keep deciding, and the natural instinct is to leave finishes open as long as possible, but the custom and long-lead pieces have to be released early or they arrive late. Lock the finishes that drive procurement on the procurement schedule, and let only the genuinely swappable ones float.
FF&E and the line between construction and the tenant
FF&E stands for furniture, fixtures, and equipment, the layer that goes into the space but is not part of the construction itself: the desks and chairs, the freestanding shelving, the kitchen equipment, the AV gear, the signage. On most deals FF&E is the tenant's responsibility and the tenant's money, separate from the construction contract and often excluded from what the TI allowance can pay for, so the work letter and the lease decide where the line falls.
The line matters because the two scopes have to mesh even though different people own them. The construction has to provide the power, data, and plumbing where the FF&E lands, which means the furniture and equipment plan has to be settled early enough to rough in for it. A kitchen line, a server rack, a workstation cluster, all of it needs services brought to the right spot. Get the FF&E plan late and you are cutting in power and data after the walls are closed.
FF&E also competes for the move-in window at the end of the job. The furniture delivery, the equipment install, the IT cutover, and the tenant's own move all want the same days between substantial completion and opening, and the building's freight elevator and dock can only handle so much at once. Sequence FF&E into the closeout schedule, not on top of it, and coordinate the deliveries with the construction punch so the two are not fighting for the same space.
How do you work in an occupied building?
You work in an occupied building by treating the rest of the building as a client you cannot disturb, because a fit-out in a live office tower, mall, or medical building is construction surrounded by tenants who are open and paying rent. The noise, the dust, the deliveries, and the trade traffic all have to be controlled so the businesses next door and overhead keep running. This is where the interior demolition guide is the companion again, because demolition is the loudest and dustiest phase and the one the neighbors notice first.
The constraints are real and they shape the schedule. Demolition and any loud work often have to happen after hours or on weekends, which costs premium labor and stretches the calendar. Dust containment and negative air keep the strip-out from migrating into occupied space and the building's return-air system, which the demolition guide details. Deliveries and debris run through a shared freight elevator and loading dock on a booked schedule, so you do not control when material comes and goes. The adjacent tenants have a right to quiet enjoyment, and the landlord will enforce it.
Plan the disruptive work around the building's life, not the other way around. Book the freight elevator and the after-hours windows well ahead, protect the common areas you carry material through, and keep the property manager informed before the complaints arrive rather than after. The job that respects the occupied building keeps its access. The one that does not gets its hours cut.
The landlord's building rules and the COI
Every occupied building runs on a set of construction rules that the landlord enforces, and they are a condition of working there, not a suggestion. The rules govern the work hours, how and when you access the building, how you protect the common areas and the elevators, what you can do on the roof, and how debris leaves. Read them before you bid, because they carry real schedule and cost. A fit-out priced as if you could work days and use the front entrance falls apart when the rules say nights and the freight dock only.
The certificate of insurance is the gate to the door. Before any crew or material comes on site, the landlord requires a COI proving general liability, workers compensation, and usually the building owner and manager named as additional insured at the limits the lease sets. Buildings commonly want the COI submitted a day or more ahead, and without it the freight elevator stays locked. Every subcontractor has to clear the same bar, so collect the COIs before the trades show up, not the morning they do.
Follow the rules even when they slow you down, because the alternative is losing access entirely. Protect the lobby and the corridor finishes you pass through, keep the dock schedule, hit the noise windows, and clean up the common areas daily. The landlord can shut a job down for violating its own building rules, and on a fixed lease date a shutdown is the one delay you cannot afford.
Specialty fit-outs: restaurant, medical, and retail
Some fit-outs carry scope that ordinary office and retail work does not, and that specialty scope drives the cost, the schedule, and the inspections. A restaurant is the heaviest of the common ones. It needs a Type I grease hood with fire suppression, a grease interceptor, a make-up air unit balanced to the exhaust, a gas service sized for the cooking line, expanded electrical, full kitchen plumbing, and compliance with NFPA 96 for the cooking ventilation. A health-department review and a separate hood inspection sit on top of the building permit, and restaurant fit-outs commonly run well longer than a comparable office because of it.
Medical and dental fit-outs carry their own systems. Lead-lined walls around imaging, medical gas with its own special inspection and certification, sound-rated partitions for privacy, dedicated and often redundant power, and clean or sterile plumbing for procedure rooms all add scope and inspection that general construction does not touch. Retail leans on the storefront, the signage, and the brand finishes, with the storefront glass and the sign permit often the long-lead and the long-pole items.
Price and schedule the specialty scope as the thing that governs, because it does. The grease duct, the medical gas, the lead shielding, and the storefront are each a long-lead item, a specialty trade, and an extra inspection rolled together. The applicable code, the health authority, and the AHJ control what each one requires, so confirm the requirements with the jurisdiction for the specific use, not from the last job.
Closing out to the certificate of occupancy
Closeout on a fit-out is not paperwork after the job, it is the gate to the move-in, because the tenant legally cannot occupy the space until the certificate of occupancy or its temporary equivalent is issued. The closeout sequence is the inspections, the life-safety sign-offs, the punch list, and the final documents, and it has to finish on or before the lease date the whole job was built around. The general closeout guide covers the mechanics, and on a TI the difference is that the lease date makes it unforgiving.
The inspections come in a sequence and they gate each other. The rough inspections have to pass before the work is covered, the trades have their final inspections, the fire marshal tests the alarm and sprinkler and signs off on the life-safety systems, and the building inspector walks the whole space to confirm it matches the approved permit set. A failed inspection that forces rework is the closeout version of a missed long-lead order, so the work has to be genuinely ready before the inspector is called, not hopeful.
Run the punch list in parallel, not after. Start the punch as areas finish, get the tenant and the architect to walk it early, and clear the items before they pile into the final days. The certificate of occupancy is the deliverable that lets the tenant move in, and everything in closeout serves it. Track the inspection sequence and the punch against the lease date the same way you tracked the permit and the long-lead, because this is where the schedule is won or lost at the end.
What is a certificate of occupancy?
A certificate of occupancy is the document the AHJ issues confirming that the completed space meets the building code for its intended use and is legally safe to occupy. On a fit-out it is the final gate, because no certificate means no legal move-in, and the tenant cannot open for business or, in many cases, even take possession until it is in hand. It is issued only after the final inspections pass and the life-safety systems are signed off.
When the work is essentially done but a few minor items remain, the AHJ may issue a temporary certificate of occupancy, a TCO, that allows the tenant to occupy while the punch finishes. A TCO is the common save on a tight lease date when signage, a finish, or a small item is outstanding but the space is safe to use. It carries conditions and an expiration, and the full certificate still has to follow. Whether a TCO is available and what it requires is the AHJ's call.
Plan the whole closeout around the certificate, because it is the one deliverable the tenant truly needs by the lease date. The life-safety sign-off from the fire marshal is usually the critical item, since the building inspector will not issue the certificate until the alarm and sprinkler are tested and accepted. Confirm the local process and the documents the jurisdiction requires early, because the requirements vary by AHJ and the time to assemble them is not free.
The budget: allowance, tenant money, and contingency
The fit-out budget is the allowance plus the tenant's own money, and managing it means knowing at all times how much of each is committed. The TI allowance is the landlord's contribution, capped and usually reimbursed after completion. The tenant's money covers the overage above the allowance, the items the allowance is barred from paying, and the soft costs. Keeping the two straight is the difference between a tenant who knows what they will owe and one who gets a surprise bill at the end.
Build the budget with the costs the allowance often does not cover, because tenants forget them. Soft costs like design fees, permit fees, and project management can be excluded from the allowance under the lease. FF&E, data cabling, and the tenant's signage are frequently the tenant's separate cost. Change orders are where the budget moves the most, so every one gets priced and approved before it goes in the field, against the allowance first and the tenant's money second.
Carry a contingency and say so out loud. A fit-out into an existing shell will find conditions the drawings did not show, and a contingency of a sensible percentage of the construction cost absorbs them without a panic. Track committed cost, not just spent cost, because the commitment is what blows the budget while the invoices are still catching up. The lease and the work letter define what the allowance covers, so reconcile the budget against those documents, not against an assumption.
The team and who controls what
A fit-out has more parties pulling on it than its size suggests, and the friction usually comes from the seams between them rather than from any one of them. The tenant owns the business decision and the money above the allowance. The landlord owns the base building, the allowance, and the building rules. The architect and engineers own the design and the permit set. The general contractor owns the construction and most of the schedule. The broker who put the deal together and the project manager who runs it for the tenant sit across the middle.
The reason this matters is that the work letter assigns responsibility but the field tests it daily. A question about who pays for a base-building shortfall is a tenant-landlord question routed through the lease. A clash in the ceiling is a contractor-architect question. A change to the layout is a tenant decision with a cost the PM has to price. Knowing whose call each one is keeps the job from stalling while everyone waits for someone else to decide.
The project manager's real job is to keep the dates, the allowance, and the decisions moving across all those parties at once. The lease date does not care which party is slow. So the PM tracks the long-lead orders, the permit status, the allowance balance, the change log, and the closeout against the one date that matters, and pushes whichever party is the current bottleneck. The lease and the work letter set the boundaries, and the team works inside them.
What to document, and the record that proves the date
A fit-out generates a stack of documents that have to be findable on the day a question lands, and the lease date is unforgiving enough that a lost record is a real cost. The lease and the work letter define the deal. The allowance balance and the change log track the money. The permit and its inspection history track the approval. The long-lead procurement log tracks the schedule. The certificate of occupancy and the closeout package prove the job is done and the tenant can move in.
Keep these tied together and current, not scattered across email and a binder nobody updates. A field tool like FieldOS keeps the work letter scope, the allowance tracking, the permit and inspection status, the long-lead procurement dates, the change log, and the closeout documents in one place, so the answer to who pays, where is the switchgear, and is the certificate issued is one lookup instead of a search. The record carries the schedule, and the schedule is the job.
| Item | Requirement | Note |
|---|---|---|
| Lease and work letter | Dates, allowance, base-building vs tenant scope | The documents that control every dispute |
| TI allowance balance | Committed and spent against the cap | Overage above the cap is the tenant's money |
| TI permit and inspections | Approved set and inspection sign-offs | Separate approval from the base-building permit |
| Long-lead procurement log | Item, lead time, latest order date | Switchgear and HVAC usually drive the date |
| Change order log | Priced and approved before field work | Where the allowance gets eaten |
| Certificate of occupancy | Final or temporary, with conditions | No CO, no legal move-in |
| Closeout package | Punch, warranties, as-builts, O&M manuals | Owed before final payment and CO |
Common mistakes
- Building the schedule forward from notice to proceed instead of backward from the fixed lease move-in date.
- Letting scope creep eat the TI allowance because changes were not priced against the cap as they came in.
- Pulling the TI permit late and treating the AHJ review as a formality instead of a critical-path constraint.
- Ordering long-lead items, especially switchgear and HVAC, on the old permit-then-procure sequence and missing the date.
- Discovering after design that the base-building electrical, HVAC, or sprinkler capacity is short for the tenant's load.
- Reaching the lease date with no certificate of occupancy because closeout inspections and life-safety sign-off were left to the end.
- Bidding the work letter without finding the base-building-versus-tenant gaps that turn into change orders.
- Skipping the existing-conditions verification and getting surprised at demolition by what the as-builts did not show.
Field checklist
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Standards and references
The controlling documents on a fit-out are the lease and the landlord's work letter, because they define the dates, the allowance, the base-building scope, and the building rules the rest of the job answers to. When the field disagrees with an assumption, those documents settle it, so read them before bidding and keep them at hand through the job.
The building code adopted by the jurisdiction, enforced by the AHJ, controls the permit, the inspections, the means of egress, the fire and life-safety systems, the accessibility, and the use and occupancy that the certificate of occupancy certifies. The International Building Code and the International Existing Building Code are common bases for alteration work, with the local amendments and the adopted edition controlling. Accessibility runs under the ADA and the local accessibility code, including the path-of-travel obligation an alteration can trigger. Restaurant cooking ventilation falls under NFPA 96 and the mechanical code, and medical gas under its own standard with a required special inspection. Confirm the specific requirements with the AHJ for the use and the jurisdiction, because the adopted edition and the local amendments control, not the last project.
The design documents, the architect's and engineers' drawings and specifications, define the scope built under the permit. Where the design, the work letter, and the field part ways, the more specific and more recent contract document governs, and the lease and work letter sit above the design on the questions of who pays and what the date is. Hedge the scope, the permit, and the occupancy to the lease, the work letter, and the code with the AHJ, because those are what actually control.
Units, terms, and definitions
A fit-out crosses real estate, design, and construction, so the same idea shows up under different names across the lease, the drawings, and the field. The terms below carry the meanings used through this guide, and the allowance is stated in dollars per square foot of leased area.
- Tenant improvement (TI) / fit-out
- The construction that turns a base-building shell into a finished space for a specific tenant
- Base building / shell
- What the landlord delivers: the structure, core, and systems brought to the suite, in a defined shell condition
- TI allowance
- The landlord's capped contribution to the fit-out, stated in dollars per square foot, usually paid as a reimbursement
- Work letter
- The lease exhibit that defines who builds and pays for what, the base-building scope, and the allowance terms
- Long-lead item
- Equipment with a lead time longer than the available schedule, such as switchgear, HVAC units, and custom glass
- Fast-track
- Overlapping design, permit, procurement, and construction to compress the schedule to the lease date
- Certificate of occupancy (CO)
- The AHJ document confirming the space meets code for its use and is legally safe to occupy
- Rent commencement
- The lease date the tenant starts paying rent, which the fit-out schedule is built to meet
FAQ
What is a tenant improvement?
A tenant improvement, or fit-out, is the construction that turns a base-building shell into a finished space for a specific tenant: an office, store, restaurant, or clinic. The tenant scope covers the interior walls, ceilings, lighting, HVAC distribution, finishes, and casework on top of what the landlord delivers as the base building.
What is a TI allowance?
A TI allowance is the money the landlord contributes to the fit-out, stated in dollars per square foot of leased area. It is a ceiling, not a budget: spend under it and the savings usually revert to the landlord, spend over it and the overage is the tenant's money. The lease defines the number.
What is a work letter?
A work letter is the part of a commercial lease that defines the construction deal: who builds and pays for what, what the landlord delivers as the base building, the allowance terms, and often the schedule and delay penalties. It is the document that decides where the money lands when a field question comes up.
What is a certificate of occupancy?
A certificate of occupancy is the document the AHJ issues confirming a completed space meets the building code for its intended use and is legally safe to occupy. On a fit-out, no certificate means no legal move-in, so it is the final gate. It issues only after the final inspections and life-safety sign-off pass.
How much is a typical TI allowance?
It varies widely with market, asset class, and lease term, commonly from the teens to over a hundred dollars per square foot. Second-generation retail sits at the low end, while medical and restaurant deals on long terms reach the high end. The lease sets the number, so the lease controls, not the range.
What happens if the fit-out misses the lease move-in date?
Missing the date costs real money, because the rent clock and the tenant's business commitment do not move for construction. Depending on the lease, the landlord may owe free rent or liquidated damages for late delivery, or the tenant pays rent on a space they cannot occupy. The lease and work letter define the penalty.
Which long-lead items should I order first on a fit-out?
Order electrical switchgear and packaged HVAC first, because they carry the longest lead times, often many months, and you cannot expedite them once you are behind. Custom glass and storefront, specialty lighting, and custom millwork follow. Release the schedule-driving items against deposits early, sometimes before the permit, working backward from the move-in date.
What is the difference between base-building work and tenant work?
Base-building work is what the landlord delivers: the structure, the shell, the core, and the systems brought to the suite. Tenant work is the fit-out on top of it, the interior layout, finishes, distributed MEP, and casework. The work letter draws the line, and the gaps on that seam become change orders, so read it before bidding.
How long does a TI permit take?
In a busy jurisdiction, the TI permit review commonly runs several weeks to a few months, and a comment cycle with a second review is normal, not the exception. The permit is separate from the base-building permit and is often the critical-path long pole. Confirm the timeline with the AHJ early and plan around it.
What is special about a fit-out in an occupied building?
In a live building, the work happens around tenants who are open, so noise, dust, and deliveries are controlled by the landlord's building rules. Demolition and loud work often run after hours, deliveries share a booked freight elevator, and every crew needs a certificate of insurance before access. Plan the disruptive work around the building's life.
People also ask
Codes cited in this guide
This guide is written and reviewed against the published standards below. Always confirm the current adopted edition with the authority having jurisdiction.