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.
Specialized builds are where the gap shows. Imaging, surgery and other procedure-heavy suites need shielding, added electrical power and medical gas, and that scope can cost more than the TI allowance a landlord priced into the listing. A listing’s allowance and asking rent assume a standard suite, and the rent a practice ends up paying depends on what it needs built. Nobody should range where a deal lands, on rent or on the landlord’s contribution, until a medical contractor has priced the scope of the build.
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:
- Standard demising walls and interior partitions
- Building-standard doors, frames, and hardware
- Building-standard HVAC ducting and diffusers to serve the suite
- Building-standard electrical panel and outlets
- Standard flooring (VCT, base carpet grade, sheet vinyl in wet areas)
- Standard ceiling grid and lay-in tiles
- Basic paint and standard finish package
- Suite entry door signage per building standard
- ADA compliance for the suite: door widths, restroom clearances, threshold heights
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:
| Item | Landlord’s default | Where 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, always | Fund infrastructure/rough-in within TI; you pay for terminals and equipment |
| Lead-lined walls (X-ray, C-arm rooms) | Tenant cost + restoration required | Fund inside TI; negotiate restoration waiver so you don’t pay to remove at lease-end |
| Backup power / generator provisions | Not offered | For anchor medical tenants (imaging, surgery), landlord provisions in shared generator; you tie in |
| ADA-compliant restrooms upgraded beyond code | Push to tenant if beyond code minimum | Fund within TI as a base-building enhancement; the next medical tenant benefits |
| Sound attenuation between exam rooms (HIPAA) | Not standard | Include within TI; it’s required for HIPAA-compliant patient interviews |
| Enhanced HVAC for procedure rooms (higher air changes) | Tenant cost | Fund within TI if adding tonnage to base building; you pay for zone-specific controls |
| Negative-pressure isolation rooms | Tenant cost | Fund within TI infrastructure; you pay for the specialty equipment |
| Data cabling to exam rooms | Tenant cost | Often 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 the build-out comes in under the allowance, 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:
- Rent credit for unused TI: whatever you don’t spend on build-out converts to free base rent, typically at $0.75 on the dollar. Common in soft trade areas.
- Cash payment for unused TI: harder to get but not impossible on longer terms with strong credit tenants. Usually capped at 25–50% of the unspent balance.
What “turnkey” actually means (and why you probably don’t want it)
Landlords in soft trade areas 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
- 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.
- Present the ask as three tiers: base scope (what landlord "must" fund), practice-specific scope (plumbing, gas, HIPAA sound), and equipment (yours).
- 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.
- 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.
- 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.
