Tenant improvements (TI) typically refers to the sum of improvements a commercial property owner makes to the interior of a rental space to suit the needs of a new tenant. This most specifically takes place in office and retail transactions, and not in multifamily assets. Some common examples of the alterations include changing the floors, walls, and ceilings. The lease agreement can also be comprised of changes, such as the lighting, air conditioning, and security. The cost of the improvements or changes may be borne by the property owner, the tenant, or both. This is determined during contract negotiation.

Find out more about tenant improvement allowances in our glossary.

Leasing Commission (LC) is an amount paid by the owner of the property based on a percentage of the lease value. For example, a tenant that signs a two-year lease for 4,000 square feet at $40 per square foot per year will have a lease value of $320,000 (4,000 sq. ft. * $40/sq. ft./year * 2). If the property owner is paying a 7% leasing commission, then the total commission that the real estate broker or agent will receive is $22,400 ($320,000 * 0.07).

Ultimately, the leasing commission will depend on various factors, such as the amount of the lease, the property type, and most importantly, what the property owner has negotiated with the agent or broker.

Tenant Improvements (TI) in commercial real estate can provide a number of benefits to both the tenant and the landlord. For the tenant, TI can help make the space more suitable for their needs, allowing them to customize the space to their liking. This can help make the space more attractive and comfortable for employees and customers. For the landlord, TI can help increase the value of the property, making it more attractive to potential tenants. TI can also help increase the rental income of the property, as tenants are often willing to pay more for a space that has been customized to their needs.

In addition, TI can help reduce the amount of time it takes to find a tenant for a property. By making the space more attractive and suitable for a tenant's needs, landlords can often find tenants more quickly. This can help reduce vacancy rates and increase the overall profitability of the property.

Finally, TI can help reduce the amount of money a landlord needs to spend on repairs and maintenance. By making the space more suitable for a tenant's needs, landlords can often reduce the amount of money they need to spend on repairs and maintenance.

Leasing Commission (LC) in commercial real estate can provide a number of benefits to both the landlord and the tenant. For the landlord, LC can help to cover the costs of tenant improvements, such as painting, flooring, and other renovations. This can help to make the property more attractive to potential tenants, which can lead to higher rental rates and more successful leases. For the tenant, LC can help to cover the costs of negotiating a lease agreement, which can save them time and money. Additionally, LC can help to ensure that the tenant is getting the best possible deal on their lease agreement.

Ultimately, the benefits of LC in commercial real estate will depend on the specific terms of the lease agreement and the amount of the LC. It is important to discuss these details with your real estate broker or agent to ensure that you are getting the best possible deal.

Tenant improvements (TI) typically refer to the sum of improvements a commercial property owner makes to the interior of a rental space to suit the needs of a new tenant. Common examples of the alterations include changing the floors, walls, and ceilings, as well as the lighting, air conditioning, and security. The cost of the improvements or changes may be borne by the property owner, the tenant, or both. This is determined during contract negotiation.

A tenant improvement allowance (TI allowance) gives a landlord a way to incentivize a tenant to sign or renew a lease while improving the property. Note that a tenant improvement allowance represents the maximum amount a landlord will cover. If a TI allowance is set at $15 per square foot and a tenant spends $20 per square foot, the landlord’s contribution will not change unless specifically agreed to in advance.

Leasing commissions are typically set at a certain amount of the overall cost of the lease, for as many years as the lease is set to continue. For instance, a five-year lease for 5,000 square feet at $30/sq. ft./year has an overall value of $750,000 (5,000 sq. ft. * $30/sq. ft./year * 5). If the leasing commission is set at 5%, the landlord/owner will pay about $37,500 in leasing commissions.

The leasing commission will depend on various factors, such as the amount of the lease, the property type, and most importantly, what the property owner has negotiated with the agent or broker.