Tenant improvement cost per square foot is one of the most quoted and least defined numbers in commercial construction. A broker means one thing by it, a landlord's work letter means another, and the contractor pricing the job means a third. Before you use any figure, you need to know what condition the space starts in, what scope the number covers, and whether furniture, cabling and fees are inside it or outside it.
This guide uses the most current published office fit-out benchmark we could verify, explains exactly what it includes, and then walks through the parts of a TI deal that move the price: starting condition, the work letter, building rules and the allowance.
What the Published Data Shows for 2026
The best free, dated national source for office fit-out pricing is Cushman & Wakefield's Office Fit Out Cost Guide. The 2026 U.S. edition, as summarized on Cushman & Wakefield's guide page (accessed October 2026), covers 42 U.S. cities and reports:
- A 5 percent annual rise in U.S. fit-out costs, led by sharp increases in Boston, Los Angeles and Charlotte.
- The three most expensive markets: San Jose at $219.32 per square foot, San Francisco at $219.26 and New York City at $212.59.
- The three least expensive: Indianapolis at $113.97, Kansas City at $108.26 and Cincinnati at $108.03.
- Electrical work as the largest contributor to overall project costs, with contractors reporting labor shortages and tariff-driven pressure.
So the published spread for an office fit-out across major U.S. markets runs from roughly $108 to $219 per square foot. Those numbers are physical construction only. Cushman & Wakefield states that soft costs, low-voltage cabling (IT, A/V and security) and furniture, fixtures and equipment are separate categories on top of them.
What a Tier 1 office fit-out looks like line by line
Cushman & Wakefield publishes a New York City example of its 2026 hard costs, broken out by trade:
| Hard cost category, New York City, 2026 | $/SF |
|---|---|
| Misc. architectural trades | $7.44 |
| Architectural millwork | $13.12 |
| Doors, frames, hardware | $21.45 |
| Drywall, acoustic, carpentry | $26.29 |
| General finishes | $13.63 |
| Mechanical, plumbing, fire protection | $50.19 |
| Electrical | $46.25 |
| General requirements, general conditions and fee | $21.84 |
| Contingency | $20.41 |
| Total hard costs | $220.62 |
Source: Cushman & Wakefield, Office Fit Out Cost Guide 2026, U.S. page. The guide's NYC hard-cost example ($220.62) and its NYC market ranking figure ($212.59) are both shown on the same page; the guide does not explain the difference, so treat both as the same order of magnitude rather than precise to the dollar.
Mechanical, plumbing, fire protection and electrical together come to $96.44 of that $220.62, or about 44 percent. That matches what most TI estimators see: the systems above the ceiling and inside the walls, not the finishes, decide where the number lands.
Cushman & Wakefield then adds non-construction costs as a percentage of hard cost to reach an "all-in" figure for the same NYC example: soft costs at 10 percent ($22.06), IT at 4 percent ($8.82), A/V at 12 percent ($26.47), furniture at 22 percent ($48.54) and miscellaneous at 2 percent ($4.41), for an all-in total of $330.92 per square foot. Furniture alone is a bigger line than electrical. When a tenant says their "TI budget" is a certain number, ask whether furniture and A/V are in it. Usually they are not, and that gap surprises people late.
How fast these costs have moved
The same guide's 2025 edition, summarized by Facilities Dive on April 2, 2025, projected fit-out cost escalation of 4.7 percent year over year and reported that office landlords had increased Class A improvement packages by 7 percent, while noting allowances were generally not keeping pace with fit-out cost increases.
On a longer view, the BLS producer price index for new office building construction (FRED series PCU236223236223) rose from 144.7 in December 2019 to 224.574 in September 2026, an increase of about 55 percent. The broader index for new nonresidential building construction (WPU801) rose from 126.6 to 186.243 over the same period, about 47 percent (BLS PPI via FRED, September 2026). Those indexes track new buildings, not interiors, but they tell you an office TI number from 2019 is badly out of date. If you are carrying forward an older bid, escalate it with the escalation calculator instead of guessing.
Why We Don't Publish a Single Number for Retail, Restaurant or Medical TI
Cushman & Wakefield's guide is an office guide. We could not find a free, current, dated national benchmark for retail, restaurant or medical tenant improvements that discloses its scope and method, so we are not printing ranges for them. What we can say is directional:
- Restaurant TI adds a kitchen hood and exhaust system, grease interception, walk-in refrigeration, upgraded gas and electrical service, and health department review. Those systems mean restaurant space does not price like office space.
- Medical and dental TI adds plumbing at exam rooms or operatories, specialty piping, and in some cases radiation shielding and medical gas. Our dental office buildout cost guide covers those scopes and the RSMeans medical office benchmark in detail.
- Retail TI often comes down to storefront, lighting, flooring and the tenant's brand package, much of which the tenant's own vendors supply.
For ground-up benchmarks by building type, see the commercial construction cost per square foot reference.
Starting Condition: The Biggest Variable in a TI Price
Two suites with the same floor area and the same finish level can price very differently depending on what is already there.
Shell or first-generation space
Shell space typically means a concrete floor, exposed structure, no ceiling, and utilities brought to the premises but not distributed. The tenant build has to supply the full ceiling plane, HVAC distribution, power and data distribution, sprinkler distribution at ceiling level, lighting, flooring and often restrooms if they are not in the building core. Every system in the Cushman & Wakefield breakdown above is in play.
Second-generation space
Second-generation space was built out for a previous tenant. When the new tenant's program fits the old layout, the job can reuse ductwork, ceiling grid, lighting, sprinkler heads, restroom plumbing and break room plumbing, and the work narrows to paint, flooring, lighting upgrades and a few wall changes. That is where the savings are.
The savings disappear when the program does not fit. Demolition is not free, and forcing an open plan onto a suite full of private offices usually means reworking HVAC zoning, relocating sprinkler heads and moving power and data, on top of demolishing walls. Price the reuse honestly: walk the space with your mechanical, electrical and fire protection subs, confirm what can stay, and price the rest as new work.
Restaurant and medical second-gen
The same logic applies with bigger numbers. A former restaurant with a working hood, grease interceptor and walk-in box in place, or a former medical suite with plumbed exam rooms, saves the next tenant of the same type a large share of the specialty scope. It saves a tenant of a different type nothing and may cost money to remove.
The TI Allowance and Who Pays the Overage
The landlord's TI allowance is not a construction budget. It is part of the lease economics, and the landlord recovers it through rent over the lease term. Allowance levels vary widely by market, building class, lease length, tenant credit and how badly the landlord needs the deal. With U.S. office vacancy at 19.8 percent in the third quarter of 2026 (Cushman & Wakefield, October 13, 2026), many office landlords still compete on concessions, but there is no single "typical" allowance that holds across markets. Get the actual offer in writing.
To see what an allowance really costs the tenant, treat it like a loan. As an illustration only: $20 per square foot repaid over a 10-year term at an assumed 8 percent annual rate works out to about $2.98 per square foot per year in added rent. The landlord's actual rate is a negotiated term, not a fixed number.
Three common deal structures
- Tenant-controlled build. The tenant hires the contractor and the landlord reimburses up to the allowance against draw requests. Everything above the allowance is the tenant's money. This is where value engineering conversations happen, and where a contractor who can show alternates wins work.
- Turnkey. The landlord's contractor builds a defined plan. Who pays for overruns depends on the lease language: market-price overruns on the agreed scope and tenant-requested changes are often treated differently. Read the clause.
- Work letter plus tenant extras. The landlord delivers a defined condition, often called a vanilla or white box, and the tenant pays for everything beyond it. Most disputes are about the definition. "HVAC distribution" or "code-compliant restrooms" means something different in every work letter, so insist on a scope exhibit with measurable items.
For the contractor, the tenant-controlled build is where markup discipline matters most, because the tenant feels every dollar over the allowance. Check your numbers with the markup and margin calculator: a 10 percent markup is a 9.1 percent margin, not 10.
Where TI Bids Go Wrong
TI margins are usually lost in the lease exhibits and building rules, not in the trade work. The repeat offenders:
- Building-standard requirements. Many Class A buildings dictate ceiling systems, door hardware, light fixtures, sprinkler head models and storefront details. Read the building rules and standards exhibit before you bid.
- After-hours work rules. Occupied buildings commonly restrict demolition, core drilling and noisy or odor-producing work to nights and weekends. Shift premiums for that labor belong in the bid as a line item, not in contingency.
- Freight elevator and dock access. Shared elevators and limited dock time stretch duration, and duration is general conditions.
- Permits and plan review. Review times vary widely by city and by occupancy; food service and health care spaces usually add a health department or state review. Call the jurisdiction for current turnaround before you commit to a schedule.
- Long-lead equipment. Rooftop units, switchgear and custom storefront can set the real schedule. Get current lead times from suppliers at bid time.
- Accessibility. Office suites are public accommodations or commercial facilities under the ADA, and the 2010 ADA Standards set requirements such as a minimum 32-inch clear door opening (Section 404.2.3). Restrooms and the accessible route through the suite are common triggers for added scope.
The free construction cost estimator is useful for a first check once you have the program, but the bid should come from a takeoff of the actual space and the actual lease exhibits.
Frequently Asked Questions
What does tenant improvement cost per square foot in 2026?
For office space, Cushman & Wakefield's 2026 Office Fit Out Cost Guide puts hard construction cost across 42 U.S. cities between about $108 per square foot (Cincinnati, Kansas City) and about $219 (San Jose, San Francisco), with a 5 percent annual increase nationally. Those figures exclude soft costs, IT and A/V cabling, and furniture. Starting condition, building standards and program density move any specific job well away from the market average.
What is the "all-in" cost of an office fit-out?
Cushman & Wakefield's New York City example for 2026 adds soft costs (10 percent), IT (4 percent), A/V (12 percent), furniture (22 percent) and miscellaneous (2 percent) to $220.62 per square foot of hard cost, for an all-in total of $330.92 per square foot. Lower-cost markets will come in lower, but the same categories apply.
What is a typical TI allowance?
It varies too much by market, building class, lease term and tenant credit for a single national number we could verify. Cushman & Wakefield's 2025 guide reported that office landlords raised Class A improvement packages by 7 percent year over year but that allowances were not keeping pace with fit-out costs. Get the allowance offer in writing and price the actual space before signing.
Who pays for TI costs over the allowance?
The lease decides. In a tenant-controlled build, the tenant usually pays everything above the allowance. In a turnkey deal, the lease spells out how overruns and tenant changes are handled. In a work-letter deal, the tenant pays for everything beyond the landlord's defined delivery condition, so that definition needs to be specific.
What is the difference between shell and vanilla box?
Shell usually means raw space with utilities brought to the premises but not distributed. A vanilla or white box usually adds finished walls, a ceiling, lighting, HVAC distribution, basic flooring and restrooms. Leases use these terms inconsistently, so rely on the scope exhibit, not the label.
Is second-generation space cheaper to build out?
Usually, when the new tenant can keep most of the existing layout, HVAC distribution, ceiling and plumbing locations. When the floor plan changes substantially, demolition and system rework can erase most of the savings. Walk the space with your MEP and fire protection subs before pricing it as a refresh.
