Tenant Improvement Buildout Costs for Commercial Retail Space in the USA (2026): By Space Type, Region, and What Actually Drives the Number
Updated July 2026
Cost Benchmarks / Tenant Improvement
Tenant Improvement Cost Per Square Foot
What a commercial buildout actually costs in 2026, broken out by space type, by the shell condition your landlord delivers, and by metro. Plus the allowance benchmarks, the lease-economics test, and the five line items that blow TI budgets.
Terrapin Construction Group · Licensed in all 50 states
All benchmarks re-based to Q3 2026. City-level cost table added for eleven metros. Industrial and warehouse TI added. Restaurant figures reconciled to a single range.
Quick Answer
What Tenant Improvement Costs
As of July 2026, basic retail tenant improvement costs $40 to $90 per gross square foot, mid-tier retail and apparel runs $90 to $180, premium retail $150 to $300, medical office $150 to $350, office and coworking $50 to $180, and restaurant TI $200 to $480 depending on service format.
Those are hard costs only, for second-generation space in an average shell. Add 8 to 15 percent for soft costs and a 5 to 10 percent construction contingency on top.
Two variables move the number more than the use type does: the shell condition the landlord delivers, which swings cost 30 to 50 percent, and the metro, where the spread between the cheapest and most expensive major markets exceeds 90 percent.
What Changed in TI Pricing This Quarter
TI economics moved in three directions through the first half of 2026, and they did not all move the same way.
- Landlord allowances tightened. TI allowances in core retail markets came down 8 to 15 percent over the first half of 2026 as landlords repriced concession packages against softer rent growth. The allowance you would have negotiated in January is not the allowance on the table now.
- Kitchen scope got more expensive. Equipment and ventilation pricing pushed restaurant kitchen scope up 6 to 9 percent over the same period. That lands hardest on quick-service, where the kitchen is a larger share of total buildout.
- Lead times finally eased. Standard finish and fixture packages are back to 4 to 6 week lead times for the first time in 18 months. Long-lead MEP equipment has not eased, so a 90-day procurement buffer is still the right assumption on anything involving a new electrical service.
The net effect is a squeeze. Costs held roughly flat while the money landlords contribute came down, so more of the buildout lands on the tenant balance sheet than it did six months ago.
Cost Per Square Foot by Space Type
Hard costs only, second-generation space, average shell condition, July 2026. Soft costs and contingency are additional.
| Space Type | Cost / GSF | Typical Use |
|---|---|---|
| Industrial and warehouse | $25–$70 | Light industrial, flex, warehouse office. Lowest-cost TI category. |
| Basic retail | $40–$90 | Apparel discount, services, hair and nail |
| Office and coworking | $50–$180 | Tenant office, hot desk, hybrid layouts |
| Fitness and wellness | $80–$160 | Gym, yoga, recovery. Boutique concepts run 30 to 50 percent higher. |
| Mid-tier retail | $90–$180 | Apparel, beauty, specialty |
| Premium retail | $150–$300 | Luxury, jewelry, flagship |
| Medical office | $150–$350 | Primary care, dental, optometry |
| Restaurant, full service | $200–$400 | Casual, fine dining, bar |
| Restaurant, quick service | $260–$480 | Coffee, fast casual, drive-thru. Highest TI cost per SF of any category. |
Restaurant TI runs two to three times basic retail per square foot, and almost all of that delta sits in kitchen infrastructure, ventilation, grease handling, and the electrical and plumbing capacity to support them. See QSR construction cost and coffee shop buildout cost for the format-level detail.
What the Landlord Delivers Decides What You Pay
This is the single most underestimated variable in TI budgeting. The same use type in the same market can cost 30 to 50 percent more in cold dark shell than in vanilla shell, and shell condition is a lease negotiation point, not a construction one.
| Shell Condition | Tenant Adds | What You Are Inheriting |
|---|---|---|
| Cold dark shell | $60–$130 | Bare structure. No HVAC, no electrical distribution, no plumbing, no restroom, often no slab finish. |
| Gray shell | $45–$100 | Utilities stubbed to the space. Distribution, HVAC, and restrooms are yours. |
| White box | $30–$80 | Finished walls and ceiling, basic lighting, HVAC in place, working restroom. |
| Vanilla shell | $20–$60 | White box plus flooring, a finished restroom, and typically a code-compliant entry. |
| Second generation | $25–$200+ | Previous tenant's buildout. Range is enormous because it depends entirely on whether their layout fits your use. |
The Decision Rule on Shell Condition
A $40 per square foot allowance on a cold dark shell means you are signing up for $50 to $90 per square foot of out-of-pocket cost. The same allowance on a vanilla shell may cover the entire buildout. Negotiate shell condition and allowance together, never separately, and price the space before the letter of intent rather than after.
One warning on second-generation space. It looks like the bargain and frequently is not. Existing electrical service, HVAC tonnage, and restroom count are undersized for the incoming use roughly 40 to 60 percent of the time, and discovering that after lease execution converts a cheap deal into an expensive one.
Mid-Tier Retail TI by Region
National averages hide a spread above 50 percent. Below are July 2026 benchmarks for mid-tier retail buildout across nine regions, shown against the national high end.
Tenant Improvement Cost by City
Regional bands work for a pro forma. They do not work when you are signing a lease on a specific street. Below are July 2026 mid-tier retail TI benchmarks for the metros where we see the most buildout activity, with the local condition that actually moves the number.
| Metro | Mid-Tier Retail TI | What Drives It Locally |
|---|---|---|
| San Francisco | $170–$265 | Highest TI cost in the country. Prevailing wage exposure, extended plan review, accessibility upgrades triggered by nearly any change of use. |
| Los Angelesincl. Orange County | $155–$245 | Title 24 energy compliance, seismic bracing on ceilings and MEP, LADBS review timelines. Orange County runs 5 to 10 percent below LA proper. |
| New York CityManhattan, Brooklyn | $150–$245 | Union labor, DOB filing and expediter costs, freight elevator scheduling, after-hours work rules in occupied buildings. Manhattan sits at the top. |
| Seattle and Portland | $112–$185 | Energy code stringency and design review add weeks. Trade availability tighter than the cost figure suggests. |
| Washington DCincl. NoVA and Maryland | $108–$180 | Historic district review where applicable, dense infill logistics, restricted delivery windows. |
| Miami, Tampa, Orlando | $98–$165 | Wind-load requirements on storefront and rooftop equipment. Permit timelines vary sharply by municipality. |
| DenverTCG headquarters | $95–$155 | Steady trade demand keeps pricing firm. Plan review is the schedule variable more often than construction is. |
| Chicago | $95–$150 | Union jurisdiction on most commercial work, which puts it materially above the broader Midwest band. |
| Houston, Dallas, Austin | $92–$150 | Deepest subcontractor bench in the country and the fastest permit turnaround among major metros. Austin runs at the top of the Texas range. |
| Atlanta, Charlotte, Nashville | $88–$145 | Right-to-work labor and a competitive GC market. Among the lowest TI costs of any major metro group. |
| Midwest secondaryGrand Rapids, Columbus, Indianapolis | $85–$138 | Lowest cost band nationally. Trade availability, not price, is the constraint on schedule. |
Two things this table does not capture. Permitting timelines vary more than costs do, and a four-week difference in plan review costs more in carried rent than a $10 per square foot construction delta. See permitting timelines by state. And these are mid-tier retail figures: apply roughly 0.6x for basic retail, 1.7x for medical, and 2.2x for restaurant in the same market.
Before You Sign
Get a Defensible TI Budget
Send us the space, the shell condition, and the lease terms. We will come back with a real number before you commit, not after. Free, and we will tell you if the deal does not work.
From Gross Cost to Net Effective TI
The construction number is not what the buildout costs you. What matters is net effective cost after the landlord's allowance and any rent abatement, amortized across the term.
Allowance Benchmarks, Q3 2026
| Deal Type | Typical Allowance |
|---|---|
| Second-generation retail, Class B center | $15–$35 / SF |
| First-generation ground-up retail | $30–$60 / SF |
| Office, longer terms | $30–$90 / SF |
| Restaurant, where the landlord wants a food anchor | $40–$100 / SF |
| Medical office, long terms | $40–$120 / SF |
A Worked Example
A 5,000 SF retail TI at $130 per SF is $650,000 gross. A $40 per SF allowance contributes $200,000. Three months of rent abatement on a $32 per SF lease is worth roughly $40,000 in present value. Net effective tenant cost is $410,000. Amortized across a seven-year term that is about $58,500 per year, or $11.70 per SF per year of additional occupancy cost. That number, not the $130, is what belongs in your pro forma.
The Lease-Economics Test
Once you have net effective TI, add it to base rent and test total occupancy cost against projected sales. For a deal to clear underwriting in Q3 2026, occupancy cost should land near 8 to 12 percent of sales for retail, 6 to 10 percent for full-service restaurant, 5 to 8 percent for quick service, and 12 to 18 percent for medical office. A deal that fails this test does not get fixed by value engineering. It gets fixed by renegotiating the lease or walking.
The TI Line Items Underwriters Miss
These five are the most common sources of budget overrun on tenant improvement work, and four of the five are code triggers rather than design choices.
- ADA path-of-travel upgrades. A change in occupancy classification, or scope above roughly 20 percent of the space, can trigger accessibility upgrades along the entire path of travel including restrooms, entries, and parking. Runs $15 to $60 per SF of impacted area. See ADA compliance in commercial remodels.
- Energy code envelope compliance. IECC and ASHRAE 90.1 requirements can be triggered by lighting or HVAC replacement, pulling insulation and glazing into scope. $8 to $25 per SF when triggered.
- Electrical service upsize. Existing 200A or 400A panels frequently will not carry a restaurant, medical, or fitness use. Going to 600A or 800A runs $35,000 to $180,000 and can add months if the utility is involved. See commercial electrical cost per SF.
- Sprinkler modifications. Wall and ceiling changes almost always require head relocation under NFPA 13. $4 to $12 per SF of impacted area, plus 4 to 8 weeks of additional permit time.
- Grease interceptors. Required on nearly every food-service use and frequently absent in second-generation space. Installation runs $15,000 to $80,000 and the permit adds 4 to 10 weeks.
Five Mistakes That Blow TI Budgets
- Designing before budgeting. Nine of ten TI projects are designed over budget, then value-engineered backward at the cost of weeks and design fees. Set the number first.
- Treating schedule as free. A 30-day delay on a space renting at $40,000 per month is a $40,000 line item that never appears in the construction budget.
- Accepting brand standards uncritically. Corporate prototype requirements drive 30 to 60 percent of TI cost on franchised concepts. Some are negotiable. Ask which.
- Signing before pricing. Shell condition, allowance, and code triggers are all knowable before lease execution. After execution you have no leverage.
- Skipping preconstruction. Engaging a contractor during design typically saves 6 to 12 percent through constructability input, and design-build delivery compresses the design and permit phases by 15 to 25 percent. See preconstruction services.
How TCG Approaches TI Work
We price buildouts before lease execution, when the numbers still change something. That includes shell condition assessment, code trigger review, and a real allowance analysis rather than a per-square-foot guess. Terrapin Construction Group delivers tenant improvement work nationwide and is licensed in all 50 states, with offices in Denver, Houston, Albany, and Sheridan. See TI and commercial buildout services or run your space through the free TCG.ai estimator.
Tenant Improvement Cost FAQ
How much does a commercial tenant improvement cost in 2026?
How much does tenant improvement cost in New York City?
What is the cheapest major metro for a tenant improvement buildout?
How much does a restaurant buildout cost per square foot by city?
What is the difference between vanilla shell and cold dark shell delivery?
How much TI allowance should I expect from a landlord?
What is the cost difference between retail and restaurant TI?
How long does a tenant improvement project take?
What hidden costs should I budget for in a TI project?
Who pays for tenant improvements, landlord or tenant?
How do I value-engineer a TI buildout without losing the brand experience?
Sources. ENR Construction Cost Index; AGC of America Construction Inflation Alert; RSMeans / Gordian; JLL and CBRE retail occupier reporting; and Terrapin Construction Group tenant improvement project data across active markets in 38 states. Benchmarks reflect July 2026 conditions. Next scheduled review: October 2026.
Related. Medical office cost · QSR construction cost · Coffee shop buildout · Commercial electrical cost · Permitting timelines by state · A&E fees and soft costs · How to read a GC bid · Commercial construction cost guide · Preconstruction services
