Tenant Resources

Tenant and property owner relationships can get complex—especially when it comes to customizing a leased space. One of the most important aspects of a commercial lease is the tenant improvement (TI) process, which allows businesses to tailor a space to meet their needs.

Whether you’re building out an office or reconfiguring a retail space, understanding how tenant improvements work can save you time, money, and stress.

At Kenwood Management, we’re here to offer insight into the tenant improvement process, helping you navigate lease terms with confidence and ensuring your space works for your business.

Want to see how Kenwood Management supports tenants? View this page to learn more.

What Are Some Examples of Tenant Improvements (TI)?

Tenant improvements refer to customizing a leased commercial space to meet a tenant’s operational needs. These can range from cosmetic changes to major construction. Common examples include:

• Installing or removing interior walls

• Upgrading flooring, ceilings, or lighting

• Repainting or refinishing surfaces

• Modifying plumbing or electrical systems

• Adding kitchenettes or break rooms

• Replacing or upgrading HVAC systems

• Installing specialized equipment or IT infrastructure

These changes are typically negotiated as part of the lease and can significantly impact the functionality and cost-efficiency of your business space.

What is Tenant Improvement?

Tenant improvement (TI) is a crucial aspect of commercial leasing that allows businesses to tailor a space to meet their specific operational needs. Whether you’re moving into a new office, retail space, or warehouse, the existing layout may not perfectly suit your business requirements. Tenant improvements provide the flexibility to modify the space—ensuring it supports productivity, efficiency, and a professional environment for employees and customers alike.

At its core, tenant improvement refers to the modifications made to a leased property to accommodate a tenant’s needs. These enhancements can include structural changes like adjusting walls and partitions, upgrading flooring and ceilings, improving lighting systems, or even installing specialized equipment. The goal is to create a space that aligns with your business operations while maintaining the integrity and value of the property.

5 Steps of the Tenant Improvement Process

The 5 key steps of the tenant improvement process include negotiation, construction planning, management of the construction progress, payment, and the certificate of occupancy. We'll go deeper into each of these steps in this section.

The Negotiation

When it comes to leasing commercial space, discussing tenant improvement construction is generally part of the lease negotiation. This is done so that the lease agreement can outline details such as the extent of the landlord’s contributions to the project.

When negotiating tenant improvement construction in your next lease for a commercial property, be sure to go over the following details:

1. The Turn-Key Build-Out: Turn-key build-out provisions are the most tenant-friendly form of tenant improvement construction. This typically means that all improvements are explicitly listed within the lease and the landlord takes care of the permitting, and construction, and pays for it all.
2. Rentable vs. Usable: The cost of tenant improvements can vary greatly depending on if the lease specifies between work done to “rentable” versus “usable” space. If the lease says the tenant can make improvements to rentable space, work can be done to common areas of the building. Usable space agreements mean a project allowance is given based on the actual usable square footage of the building.
3. Scope of Work: Does the lease specify what type of tenant improvement construction can be done? Examples include: repainting walls and floors, replacing floors, upgrading HVAC systems, electrical work, ceiling replacement, demolition or installation of walls, and more.
4. Substantial Completion: A lease with tenant improvement construction provisions should include a substantial completion date. Major projects can take time and it is important to account for this time. It is a best practice to align the substantial completion date with the beginning of rental payments by the tenant.
5. Additional Costs: Tenant improvement construction involves a lot of variables. This can lead to cost overruns and inflated budgets. Your lease should have an agreed-upon contingency plan in place for these instances. Make sure it answers whether or not overrun expenses are capped and who is responsible for those costs.

By addressing these items during negotiations, both parties can avoid misunderstandings and help ensure a more efficient and successful build-out phase.

Construction Planning

The planning for tenant improvement construction can be broken down into three parts:

• Design
• Planning
• Construction cost estimation

If possible, work with an experienced architect to design and plan the project. They will be able to guide you through the process and ensure that you’re satisfying building codes and ADA requirements. When choosing an architect or contractor be sure to ask the following questions:

• Is the contractor licensed and insured?
• Can they give you references/examples of similar tenant improvement projects they've completed in the past?
• How much experience?

The architect or contractor you’re working with can help you estimate the cost of your project. However, when it comes to estimating construction costs, a completely accurate and final estimate may not be able to be completed until the final plans for the project are submitted to the city/municipality for approval.

Management of Construction in Progress

The construction of your project should be evaluated regularly. Ask to receive weekly reports to make sure milestones are being met and everything is aligned with the original project schedule. Reports should include inspection results, pictures of project progress, and any schedule updates or notifications of potential delays.

It’s also important to make sure utilities are all set up and ready for construction to begin to avoid delays.

Make sure you hire an experienced, licensed team that is familiar with building codes and regulations in the area where you are working to manage your construction.

Payment: Who Pays for Tenant Improvement?

The way contractors receive payment can vary; Generally, they are paid once the work is completed. There can be exceptions to this depending on the project requirements and contract terms. It’s important to make sure that these terms are clear and agreed upon upfront before any work is done to avoid any misunderstandings.

Certificate of Occupancy

After the project is finished and all inspections have been completed, you should receive a certificate of occupancy. This certificate shows that the work you’ve done to the property has been inspected and approved by all necessary local authorities and the structure is, in fact, livable and safe. Once you receive a certificate of occupancy, your space is officially ready to use for your business.

Make Tenant Improvements Work for Your Business with Kenwood

Navigating the tenant improvement process doesn’t have to be overwhelming. With the right guidance, thoughtful planning, and a clear lease agreement, you can transform any commercial space into a customized environment that meets your business goals and reflects your brand.

For more helpful tips, download our guide: “Secrets to Your Commercial Real Estate Investment Success!”

At Kenwood Management, we believe in building strong partnerships with our tenants from day one. That includes supporting you through the tenant improvement process.  At Kenwood, we are always happy to discuss tenant improvement construction with our prospective tenants. If you're interested in more information, contact Kenwood here: