TI negotiation for medical office: what the landlord should pay for vs. what you’ll eat | MD Office Spaces
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TI negotiation · Leasing 101 · August 2026

TI negotiation for medical office: what the landlord should pay for, and what you’ll eat.

Medical build-outs cost real money, anywhere from $80 to $250+ per RSF depending on how much exam-room plumbing, medical gas, lead-lined wall, and negative-pressure work the space needs. Whether the landlord funds it or you finance it out of pocket comes down to how the tenant improvement (TI) allowance is negotiated. Here’s how tenant reps actually structure the ask.

The TI number the landlord quotes isn’t the number you’ll get

A landlord will quote a TI allowance in $/RSF, say $40/SF on a five-year deal or $75/SF on a ten-year. That number is opening position, not final position. The real number depends on three things: your term length, your credit, and the specific improvements they’ll fund out of it.

The single biggest lever is term length. Landlords amortize TI over the lease term at their internal cost of capital (typically 8–10% on medical office in Southern California). A ten-year deal reliably pulls 2x the TI a five-year deal will. Practices that can commit to longer terms trade some flexibility for materially better economics.

What the landlord funds without much argument

These are considered "base building" improvements in most Southern California medical office leases, landlords fund them out of standard TI because they revert to the landlord’s benefit at lease-end or because they’re required by code:

What they push back on, and what to demand anyway

This is where every medical office negotiation lives. These items are common in medical build-outs but sit in the gray zone between "your problem" and "landlord’s asset improvement." Every one of them is negotiable, and every one of them belongs in your TI ask:

ItemLandlord’s defaultWhere tenants win it
Plumbing to exam rooms (sinks, wet columns)Tenant cost, "specific to your use"Argue that plumbing is a permanent asset improvement that benefits the next medical tenant; ask for 100% within TI
Medical gas (O2, N2O, medical vacuum)Tenant cost, alwaysFund infrastructure/rough-in within TI; you pay for terminals and equipment
Lead-lined walls (X-ray, C-arm rooms)Tenant cost + restoration requiredFund inside TI; negotiate restoration waiver so you don’t pay to remove at lease-end
Backup power / generator provisionsNot offeredFor anchor medical tenants (imaging, surgery), landlord provisions in shared generator; you tie in
ADA-compliant restrooms upgraded beyond codePush to tenant if beyond code minimumFund within TI as a base-building enhancement, next medical tenant benefits
Sound attenuation between exam rooms (HIPAA)Not standardInclude within TI, required for HIPAA-compliant patient interviews
Enhanced HVAC for procedure rooms (higher air changes)Tenant costFund within TI if adding tonnage to base building; you pay for zone-specific controls
Negative-pressure isolation roomsTenant costFund within TI infrastructure; you pay for the specialty equipment
Data cabling to exam roomsTenant costOften lumped into TI if part of initial buildout; separate line-item afterward

The trap: unused TI

Most first-time medical tenants don’t realize that a landlord’s TI allowance is use-it-or-lose-it. If you’re given $75/SF but your build-out costs $62/SF, most standard leases let the landlord keep the difference. That’s money the landlord is happy to promise because they don’t expect you to use it all.

Push for one of two structures instead:

What “turnkey” actually means (and why you probably don’t want it)

Landlords in soft submarkets will sometimes offer a "turnkey" build-out, they design and construct the suite to your spec, no TI allowance, no line items. It sounds easier and often is. But you lose two things: control over quality (landlord’s contractor, landlord’s finish level) and ownership of upgrades that you might have chosen differently. Turnkey works for small suites and simple layouts. For medical anything more than a basic 2–3 exam-room primary care suite, you almost always want the TI allowance and your own contractor.

The negotiation sequence that actually works

  1. Get bids on your build-out first, from a medical office GC, not from the landlord’s in-house contractor. Real numbers make the TI ask concrete.
  2. Present the ask as three tiers: base scope (what landlord "must" fund), practice-specific scope (plumbing, gas, HIPAA sound), and equipment (yours).
  3. Anchor to term: "we’ll go 10 years if TI covers tiers 1 and 2." Term is what landlord wants; TI is what you want. Trade them explicitly.
  4. Get restoration waived for every improvement funded within TI. Same conversation, same trade. If the landlord funded it, you shouldn’t pay to remove it.
  5. Cap out-of-pocket cost overruns at a fixed dollar or percentage. Medical build-outs frequently run over, unlimited exposure to change orders is a real risk you can negotiate away.

Considering a move — or renegotiating a lease you’re already in?

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