TI, Abatement: What Does It Mean?


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A lot of tenants commonly ask, “What is TI and Abatement?” and it’s a good question. Tenants ask because a lot of landlords don’t typically offer it, and so its unknown what it is, but it is certainly available in every transaction.

What is TI? Tenant Improvements.

  • This is considered money the landlord will spend for the tenant to build out their space
  • The more years you sign, the bigger TI you will get
  • Theoretically: the costs of TI the landlord spends is amortized back in rental rate, which means the tenant is paying for it over time
  • This is a very nice benefit for the tenant to keep cash as a resource, and let landlord cash out of pocket for the space to be build out

Typical build out from raw conditions

  • Up to high end is around $1000 a foot
  • For a doctors office: $80-100 a foot
  • For a law firm: $50-60-80 a foot (includes nicer materials)
  • For a cheaper firm, it will be a less expensive build out of approximately $35-40

What is Abatement? Free Rent.

  • This is another term for free rent
  • Typically, you should get a month of free rent per lease year (usually up front)
  • For example, 5 year lease equals to 5 months free (the free rent is usually applied at the beginning of your lease)

You should think of your lease negotiation as the landlord having a lot of money available, and there are different ways you can use it. There are three things money can be spent for in a lease negotiation:

        1. Lower rent
        2. Free rent
        3. Tenant Improvement Dollars

 

Usually there is a combination that gets the landlord the return he/she is looking for. You cannot have the lowest rent, all TI and tones of free rent. You can have some combination of those three and use them however you need them. But don’t forget to ask!

 

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