If you're a landlord preparing white-box space for a new tenant, an operator signing a lease and budgeting your buildout, a developer estimating TI allowances for a multi-tenant project, or a broker advising a client on how much construction will actually cost after they sign — you need a realistic, current-market picture of what tenant improvement buildouts cost per square foot across different commercial space types.

The problem is that most of the numbers floating around the market are useless without context. A "buildout cost per square foot" means nothing without knowing whether you're talking about a cosmetic refresh in a second-generation office suite or a ground-up kitchen installation in a cold dark shell. The range between those two scenarios is a factor of five or more. And TI allowances from landlords, which Cushman & Wakefield confirms remain one of the most powerful lease negotiation tools in commercial real estate, rarely cover the full buildout — leaving tenants, landlords, and developers all trying to close a gap they haven't properly measured.

This article provides current-market TI buildout cost data across six commercial space categories — office, general retail, restaurant and food service, medical and dental, industrial and flex, and specialty — with cost ranges calibrated to 2026 pricing, regional adjustments, and an honest accounting of where the money actually goes. The data reflects project work from Terrapin Construction Group's construction management and general contracting portfolio across the U.S., benchmarked against industry data from Cushman & Wakefield's 2026 Office Fit Out Cost Guide, RSMeans/Gordian, and current project-level pricing from the field.

What Is a Tenant Improvement Buildout — and Why the Cost Range Is So Wide

A tenant improvement buildout is the construction work required to convert a leased commercial space from its delivered condition — whether that's a raw shell, a warm shell, or a second-generation space vacated by the previous tenant — into a finished, code-compliant, occupancy-ready environment for a specific business use. The scope can range from paint and carpet in an existing office suite to a complete gut renovation including new mechanical, electrical, and plumbing systems, commercial kitchen installation, or specialized medical infrastructure.

The reason cost ranges are so wide is that TI buildout costs are driven by three variables that interact with each other: the starting condition of the space, the complexity of the end use, and the geographic market. A basic retail refresh in a warm shell in Houston is a fundamentally different project than a dental office buildout in a cold dark shell in Boston — and the cost difference can easily be $200 or more per square foot on the same footprint. Understanding where your project sits on these three axes is the first step toward building a realistic budget.

According to BhumiCalculator's 2026 analysis of over 400 recent U.S. projects, national TI costs range from approximately $45 to $285 per square foot across all categories. Office buildouts average $80 to $140, medical spaces run $150 to $380, restaurant buildouts range from $110 to $285, and general retail falls between $45 and $150. But those national averages mask enormous regional and project-specific variation — which is why this article breaks the numbers down by category and by region.

Shell Condition: The Variable That Determines Your Starting Line

Before discussing per-square-foot costs by space type, you need to understand the three shell conditions that commercial spaces are delivered in, because the shell condition determines how much of the total MEP (mechanical, electrical, plumbing) infrastructure the tenant is responsible for installing — and MEP is typically the largest single cost category in any TI buildout.

A cold dark shell (also called a vanilla shell or gray shell) is the most basic delivery condition. The tenant receives a concrete slab floor, unfinished walls (typically bare studs or CMU), no ceiling, no HVAC system, no finished electrical beyond a stub to the panel, and no plumbing beyond a capped connection. Everything — HVAC distribution, electrical circuits, lighting, plumbing, insulation, drywall, ceiling, flooring, paint — is the tenant's responsibility. This is the most common delivery condition for new retail strip centers, outparcels, and ground-floor commercial spaces in new construction. Buildout costs from a cold dark shell are the highest because you're building everything from the studs in.

A warm shell (also called a white box or warm lit shell) includes the base building HVAC system stubbed to the space, a finished (or near-finished) ceiling, basic lighting, insulated and drywalled perimeter walls, a sealed concrete or basic finished floor, and a functional electrical panel with basic circuiting. The tenant is responsible for interior partition walls, finish flooring, specialty lighting, additional electrical and data, plumbing beyond base connections, and all finish work specific to their use. Warm shell delivery significantly reduces TI costs because the major MEP backbone is already in place. This is the most common delivery condition in Class A and B office buildings and some higher-end retail projects.

A second-generation space (also called second-gen or previously occupied space) has been built out by a prior tenant. It may include existing partition walls, ceiling grid, lighting, HVAC distribution, restrooms, and some flooring. The buildout cost depends entirely on how well the previous layout matches the new tenant's needs and what condition the existing systems are in. A medical office moving into a former medical office may need minimal work. A restaurant taking over a former retail space may need to gut almost everything. Second-gen spaces offer the widest cost variance of any shell type — they can be the cheapest option or they can be more expensive than a warm shell if extensive demolition and reconfiguration is required.

At Terrapin's preconstruction phase, assessing shell condition and quantifying what the landlord's delivery includes versus what the tenant is responsible for is the first step in any TI budget — and it's the step most commonly skipped by tenants who later experience sticker shock.

TI Buildout Costs by Space Type: What You'll Actually Pay in 2026

The following cost ranges represent hard construction costs for TI buildouts — demolition, framing, drywall, MEP rough-in and finish, ceiling, flooring, painting, millwork, and specialty installations. They exclude furniture, fixtures, and equipment (FF&E) unless noted, and exclude architectural and engineering fees (typically 8–12% of hard costs), permit fees, and tenant-supplied specialty equipment. All figures reflect mid-market national averages; regional adjustments follow in a later section.

Office Space

Office TI buildout costs in 2026 range from $50 to $175 per square foot nationally, with the wide spread reflecting the difference between a basic refresh and a complete buildout from shell. A cosmetic refresh in a second-generation office — new paint, carpet, minor electrical updates, possibly one or two wall relocations — runs $50 to $80 per square foot. A standard mid-range office buildout from a warm shell — new partition walls, ceiling grid, lighting, data cabling, breakroom, and conference rooms — falls in the $80 to $140 range that current industry benchmarks confirm as the national average for office TI. A high-end or specialty office buildout — law firm, financial services, executive suites with premium finishes, built-in millwork, and upgraded HVAC zoning — runs $140 to $175 or higher in gateway markets.

Cushman & Wakefield's 2026 Office Fit Out Cost Guide notes that law firm buildouts cost approximately 16% more than standard office tenants due to premium materials and finishes, and that electrical work remains the largest single contributor to overall project costs across all office TI. San Francisco, San Jose, and Seattle remain the most expensive office TI markets, while Dallas, Phoenix, and Houston offer the most favorable pricing.

General Retail

Retail TI buildout costs range from $45 to $150 per square foot depending on the category of retail and the shell condition. Value and discount retail — think Dollar Tree, basic service retail, or simple merchandise display environments — consistently prices at the low end of the range, with prototype-driven layouts running $38 to $55 per square foot by using standardized designs, economical finishes, and compressed construction timelines. Mid-range retail with some specialty finishes — boutiques, specialty food, fitness studios, personal services — runs $75 to $120 per square foot. High-end retail with premium finishes, custom lighting, and branded environments pushes to $130 to $150 or higher.

The biggest cost variable in retail TI is whether the space is delivered as a cold dark shell or a warm shell. In a new strip center or retail pad development, landlords typically deliver cold dark shell, and the tenant is responsible for the entire interior buildout including HVAC. That HVAC system alone — for a 2,000 to 5,000 square foot retail space — can represent $15,000 to $60,000 or more depending on configuration, adding $8 to $15 per square foot before any finish work begins.

Restaurant and Food Service

Restaurant TI is the most expensive non-medical commercial buildout category, and it's where the gap between perceived cost and actual cost is widest. According to EB3 Construction's restaurant cost analysis, restaurant buildout costs range from $100 to $800 per square foot, with most tenant improvement projects falling between $150 and $750 per square foot depending on concept, location, and finish quality.

The cost driver in restaurant TI is the kitchen — specifically the commercial hood and ventilation system, grease interceptor, fire suppression, commercial plumbing (three-compartment sink, handwash stations, floor drains, gas lines), and the dedicated electrical circuits for commercial cooking and refrigeration equipment. Kitchen infrastructure alone can represent 25 to 35% of the total restaurant buildout budget. A Type I exhaust hood system with makeup air, fire suppression, and ductwork to roof can cost $15,000 to $50,000 installed for a standard 10-foot hood run — and that's before any cooking equipment is placed.

For operators planning QSR or restaurant buildouts in leased spaces, the same planning principles apply as in ground-up QSR construction and QSR coffee shop development — early engagement with a GC who understands commercial kitchen infrastructure is the single most effective way to avoid budget overruns. Terrapin's design-build approach brings kitchen equipment specification, MEP coordination, and construction budgeting together during the design phase rather than discovering conflicts in the field.

Medical and Dental

Medical TI is the highest-cost category in commercial buildout work, driven by specialized MEP systems, code compliance requirements, and equipment integration that have no equivalent in standard commercial construction. Current 2026 benchmarks place medical office TI at $150 to $380 per square foot nationally, with general practice and urgent care at the lower end and specialty suites (imaging, surgical, dental with operatories) at the upper end. Medical TI costs have increased 5 to 8% year-over-year into 2026 while other categories have remained relatively flat.

The cost premium in medical TI comes from several sources that are unique to healthcare construction. Medical-grade HVAC with enhanced filtration and pressure relationships between rooms adds significant mechanical cost. Specialized plumbing for medical gas (vacuum, compressed air, oxygen in some cases), dental vacuum lines, and clinical handwash stations requires plumbing infrastructure well beyond standard commercial. X-ray and imaging suites require lead-lined walls and dedicated electrical circuits with isolation transformers. ADA compliance in healthcare settings is more stringent than in general commercial space, affecting clearances, door widths, restroom configurations, and accessible route design throughout the suite.

For developers and operators planning medical buildouts, the articles on optometry office construction costs, urgent care construction costs, and the 2026 hospital construction boom provide detailed cost breakdowns for specific healthcare facility types. The common thread across all medical TI: the MEP scope is what makes it expensive, and finalizing the equipment plan before design begins is the most effective cost control measure available.

Industrial, Flex, and Warehouse Office

Industrial TI — the office, break room, restroom, and support space buildout within a warehouse, distribution center, or flex building — is typically the lowest-cost TI category because the scope is limited and the finish expectations are modest. Office buildout within an industrial shell runs $40 to $90 per square foot for the office portion. Restroom installations in warehouse space run $15,000 to $40,000 depending on fixture count and whether you're connecting to existing plumbing or running new service. Basic warehouse office with open plan desking, a break room, and one or two enclosed offices can be completed for under $60 per square foot in most markets.

The cost variable in industrial TI is typically the HVAC serving the office zone. Warehouse buildings are often unheated or minimally conditioned, and carving out a climate-controlled office zone requires either a split system or a dedicated rooftop unit serving just the office space, plus proper separation (insulated walls, ceiling, and sometimes a vapor barrier) between the conditioned office and the unconditioned warehouse. This separation scope can add $10 to $25 per square foot to what would otherwise be a simple interior buildout. For owners evaluating industrial and logistics TI, our analysis of 3PL and logistics construction costs covers the broader facility context.

Specialty: Cannabis, Cold Storage Office, Data Center Support

Specialty buildouts — cannabis retail dispensaries, office space within cold storage facilities, data center support spaces, and laboratory or clean room environments — fall outside standard TI cost ranges because they involve regulatory, environmental, or technical requirements that are unique to their sector. Cannabis dispensary buildouts, for example, must comply with state-specific security, vault, and surveillance requirements that vary dramatically across jurisdictions, as we've discussed in our coverage of cannabis facility value engineering and emerging cannabis markets. Cold storage office TI must address the thermal separation between the climate-controlled office zone and the adjacent frozen or chilled warehouse — a scope that directly parallels IMP installation for cold storage and controlled-environment facilities.

For these specialty categories, budgeting from generic per-square-foot benchmarks is unreliable. Preconstruction services with a GC who has specific experience in the relevant specialty are the only way to develop a credible budget before committing to a lease or acquisition.

Planning a tenant improvement buildout?

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TI Allowances: What Landlords Are Offering and What It Actually Covers

A tenant improvement allowance (TIA) is the dollar-per-square-foot amount a landlord contributes toward the tenant's buildout costs, typically negotiated as part of the lease. TI allowances are one of the most important — and most misunderstood — components of any commercial lease negotiation. The allowance reduces the tenant's out-of-pocket capital requirement, but it almost never covers the full cost of a buildout, particularly for high-complexity uses like restaurants and medical offices.

In the current market, TI allowances for office space typically range from $15 to $60 per square foot depending on building class, market, and lease term. Class A office buildings in competitive markets may offer $40 to $60 per square foot or more for creditworthy tenants signing long-term leases. Class B buildings in secondary markets may offer $15 to $30. Retail TI allowances are typically lower — $10 to $30 per square foot is common for inline retail in strip centers, with some landlords offering $40 to $50 for anchor or credit tenants. Medical and restaurant tenants, whose buildouts are the most expensive, often negotiate higher allowances or alternative structures (free rent periods, landlord-funded base building upgrades, or amortized TI over the lease term) to bridge the gap between the allowance and the actual buildout cost.

The critical calculation for any tenant is simple: take your estimated buildout cost per square foot, subtract the TI allowance, and that's your out-of-pocket cost. If a medical office buildout costs $200 per square foot and the landlord offers $40 per square foot in TI allowance, the tenant is responsible for $160 per square foot — which on a 3,000-square-foot suite is $480,000 in capital that the tenant must fund. Getting preliminary construction bids before lease execution, not after, is the only way to know whether the TI allowance makes the deal work. Terrapin provides preconstruction budgeting specifically for this purpose — giving tenants and their brokers real numbers before the lease is signed.

One emerging trend worth noting: approximately 60% of 2026 leases in competitive markets now include some form of TI cost escalator or adjustment provision to account for construction cost volatility. If your lease doesn't include one, you're accepting 100% of the risk that costs increase between lease execution and construction start — a gap that can be 3 to 6 months or more in markets with long permitting timelines.

Regional Cost Factors: Why the Same Buildout Costs 40% More in New York Than in Dallas

Just as with ground-up commercial construction, TI buildout costs vary significantly by region. Cushman & Wakefield's 2026 analysis confirms that San Francisco, San Jose, and Seattle remain the most expensive markets for office fit-out, while Dallas, Phoenix, and Houston offer the most favorable pricing. The U.S. recorded an overall 5% annual rise in fit-out construction costs, with the sharpest escalations in Boston, Los Angeles, and Charlotte.

The Southeast and Texas markets — Dallas, Houston, Austin, Atlanta, Nashville, Charlotte — offer the most favorable TI buildout cost environment in the country. Right-to-work labor markets, competitive subcontractor availability, and lower prevailing wages keep TI costs 10 to 20% below the national average. Terrapin's Houston office serves TI projects across the Texas and Southeast markets.

The Midwest — Chicago, Columbus, Indianapolis, Kansas City, Minneapolis — tracks close to the national average, with Chicago running 15 to 25% above due to union labor requirements. Secondary and tertiary Midwest markets generally price at or slightly below national averages.

The Mountain West — Denver, Salt Lake City, Boise, Phoenix — has seen meaningful cost appreciation over the past five years driven by population growth and commercial development activity. TI costs in the Denver metro now run 10 to 20% above the national average. Terrapin's Denver and Sheridan offices serve this market.

The Northeast — New York, Boston, Philadelphia, Washington D.C. — is the most expensive TI market in the country. Union labor, high permit fees, constrained subcontractor availability, and stricter code requirements drive costs 25 to 45% above the national average. Commercial construction costs in the Eastern U.S. run $350 to $870 per square foot across building types. Terrapin's Albany office serves the greater Northeast.

The West Coast — California, Seattle, Portland — combines high labor costs (both union and prevailing wage), stringent energy codes (California's Title 24 in particular), extended permitting timelines, and aggressive accessibility enforcement. 2026 market data shows the West Coast carrying an 11% labor surcharge over the national average. Specialty scopes like medical and restaurant TI in California routinely exceed national benchmarks by 30% or more.

Where the Money Actually Goes: Hard Cost Breakdown for a Mid-Range Buildout

Understanding how TI dollars are allocated helps landlords, tenants, and developers identify where value engineering creates the most impact and where cutting corners creates problems. For a mid-range office or retail TI project, the typical hard cost breakdown looks like this:

MEP systems — mechanical (HVAC), electrical, and plumbing — consistently represent the largest share of TI hard costs, typically 35 to 45% of the total budget. Electrical work alone is the single largest line item in most buildouts, as Cushman & Wakefield confirms. This includes panel upgrades, branch circuiting, data and telecommunications infrastructure, lighting fixtures and controls, and fire alarm modifications. In restaurant and medical buildouts, the MEP share can reach 50% or more of total hard costs due to commercial kitchen systems or medical-grade mechanical and plumbing requirements.

Interior construction — framing, drywall, doors, hardware, ceiling grid, and acoustical tile — typically represents 20 to 30% of the budget. This is the scope most visible to the tenant but not the largest cost driver. Flooring and floor preparation represent 8 to 12%, with the range depending on whether you're installing basic carpet tile or specialty flooring like polished concrete, luxury vinyl, or ceramic tile. Finish carpentry, millwork, and specialty items — reception desks, built-in cabinetry, display fixtures — add 5 to 15% depending on the concept. Demolition (in second-gen spaces) and general conditions typically account for the remaining 8 to 12%.

Soft costs — architecture, engineering, permits, inspections, and project management — add 8 to 12% on top of hard costs. In high-regulation markets like California and New York, permitting alone can add 6 to 8 weeks to the project timeline and $5,000 to $25,000 or more in fees depending on the jurisdiction and scope of work.

The Five Planning Mistakes That Blow TI Budgets

After managing commercial TI projects across the country, these are the five most consistent planning mistakes we see create budget overruns, timeline extensions, and contentious landlord-tenant disputes.

Signing the lease before getting construction bids. This is the most expensive mistake in commercial tenant improvement, and it happens constantly. Tenants and their brokers negotiate a TI allowance based on assumptions about buildout cost — and then discover during construction pricing that the actual cost is 30 to 50% higher than assumed. By that point, the lease is executed and the tenant has no leverage to renegotiate. Getting preliminary GC pricing before lease execution — even if it's a budgetary estimate, not a hard bid — is the single most impactful step any tenant can take to protect their capital. Terrapin's preconstruction team provides this pre-lease budgeting as a standard service.

Underestimating MEP scope. Tenants and architects who have not recently priced TI construction consistently underestimate mechanical, electrical, and plumbing costs — particularly in restaurant, medical, and any use requiring supplemental HVAC capacity. The 2026 construction cost environment has seen MEP scopes — especially electrical — escalate faster than other trades due to code changes, skilled labor shortages, and material cost pressures on copper and aluminum driven by Section 232 tariffs.

Treating the base building condition as guaranteed. Landlords deliver space in a specific condition described in the work letter attached to the lease. But the delivered condition sometimes doesn't match the work letter — the HVAC capacity is insufficient for the tenant's use, the electrical service can't support the load, the plumbing stub locations don't align with the floor plan, or the ceiling height is lower than expected due to existing ductwork or structural elements. Tenants who don't conduct a thorough walk-through with their GC before lease execution — or who rely solely on the landlord's representations without independent verification — absorb these costs as change orders during construction. The owner's representative function TCG provides during the pre-lease phase specifically addresses this gap.

Finalizing design without real-time construction pricing. As the American Institute of Architects acknowledges, the majority of commercial projects are delivered to a GC for first pricing with a design that exceeds the owner's budget. TI projects are particularly vulnerable because the design is often developed by an architect working without real-time cost data from a contractor. The result: a design that looks right on paper but prices 20 to 30% over budget, triggering a redesign cycle that adds weeks to the timeline and frustration to the process. Engaging a GC at the design stage through a design-build process eliminates this cycle by keeping budget and design aligned from the start.

Ignoring lead times for specialty items. In the current supply chain environment, lead times for items like custom millwork, specialty lighting, commercial kitchen equipment, medical equipment, and even standard HVAC equipment can run 8 to 20 weeks from order. Tenants who don't specify and order long-lead items early in the process push their move-in date by the full length of the delay. TCG's equipment procurement division coordinates long-lead ordering as part of the preconstruction timeline — getting critical items on order while permitting and early construction work are underway.

Second-Generation Space: When It Saves Money and When It Doesn't

Second-generation space — a previously occupied suite — is often positioned as the cost-effective alternative to building out from shell. And in many cases, it is. An office tenant taking over a former office suite with a compatible layout, existing HVAC, and usable ceiling and flooring can often complete a renovation for $50 to $80 per square foot — half or less of what a cold dark shell buildout would cost.

But second-gen space becomes expensive when the previous use doesn't match the new use. A restaurant taking over a former retail space needs to install an entirely new kitchen, which means trenching the existing slab for plumbing and gas lines, installing a commercial exhaust system through the existing roof structure, upgrading the electrical service for commercial cooking loads, and installing grease interceptors. These scopes can cost more than starting from a warm shell because you're demolishing existing work before you can build new — paying twice for work the shell condition would have given you once.

The same principle applies to medical tenants taking over non-medical space. Slab trenching for dental vacuum and water lines, for example, can cost $18 per square foot or more for the operatory areas alone — consuming 15 to 20% of the entire TI allowance before a single wall is framed. The lesson is straightforward: second-gen space saves money when the existing infrastructure matches your needs, and it costs more when it doesn't. A GC walk-through before lease execution is the only way to know which scenario you're in.

How to Get TI Buildout Right: The Process That Protects Your Budget

The difference between a TI project that comes in on budget and one that doesn't almost always traces back to decisions made before construction starts — during site selection, lease negotiation, and preconstruction. The right process follows a consistent sequence.

First, define the use and the program before looking at spaces. The number of private offices, exam rooms, kitchen stations, or retail display zones you need determines the minimum square footage, the MEP requirements, and the shell condition you should be targeting. Starting with the space and working backward to the program is how buildouts go over budget.

Second, get preliminary GC pricing on candidate spaces before lease execution. This doesn't require full construction documents — a GC with TI experience can develop a reliable budgetary estimate from a floor plan concept, a walk-through of the space, and a conversation about the program and finish level. This estimate becomes the basis for TI allowance negotiation and capital planning.

Third, negotiate the lease work letter with precision. The work letter defines exactly what the landlord delivers and what the tenant builds. Ambiguity in the work letter is the single most common source of post-lease disputes between landlords and tenants. Every HVAC, electrical, plumbing, and structural element should be specified clearly as either landlord-provided or tenant-provided.

Fourth, engage a GC at design, not after design. Design-build delivery keeps budget and design synchronized from day one. The architect designs to a budget that the contractor has validated as buildable — not to an aspirational budget that gets corrected during bidding.

Terrapin Construction Group provides commercial general contracting, construction management, design-build delivery, and owner's representation for tenant improvement projects across all commercial space types nationwide. Our offices in Denver, Houston, Albany, and Sheridan serve projects across all 50 states. If you're planning a TI buildout — whether you're a tenant, a landlord, or a developer — and want a frank conversation about what it's going to cost and how to protect your budget, we'd welcome a call.

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Sources

Cushman & Wakefield — 2026 Office Fit Out Cost Guide

Cushman & Wakefield — Tenant Improvement Allowance Guide

BhumiCalculator — 2026 Tenant Improvement Costs Per Square Foot (Office, Medical, Retail)

APX Construction Group — Tenant Improvement Cost Per SF: 2026

EB3 Construction — Restaurant Build-Out Cost Estimate, 2025

HomeGuide — Commercial Construction Cost Per Square Foot, 2026

Mann Lee CW — Commercial Building Construction Cost Per Square Foot, 2026

RSMeans/Gordian — Construction Cost Data

WeWork — The Costs of Commercial Building Construction and Build-Outs

EVstudio — Cost Per Square Foot of Commercial Construction by Region

Epic Electrical — Tenant Improvement Allowance DFW: 2026 Guide

LoopNet — Tenant Improvement Allowance in Commercial Real Estate

H.W. Holmes — Cost of Tenant Improvements Per Square Foot

Lumicre — Understanding the Costs of Commercial Build-Outs

BuildNP — Your Guide to Tenant Improvement Costs Per Square Foot

Maxx Builders — Commercial Build-Outs: Planning to Completion

American Institute of Architects

Beaufurn — Interior Build Out Cost Per Square Foot: 2025 Guide

Tenant Improvement Buildout Costs for Commercial Retail Space in the USA (2026): By Space Type, Region, and What Actually Drives the Number

What Is a Tenant Improvement Buildout — and Why the Cost Range Is So Wide

Shell Condition: The Variable That Determines Your Starting Line