Whether you own a strip center in Plano, a medical office building in Houston, or a warehouse in San Antonio, tenant improvement (TI) projects are part of the rhythm of commercial real estate. A new tenant signs a lease, you agree to certain build-out terms, and suddenly you’re coordinating contractors, permits, and timelines — often under pressure to deliver a turnkey space by a hard occupancy date.
Done well, a TI project lands a long-term tenant and protects the value of your property. Done poorly, it eats your reserves, drags on for months, and sours the landlord-tenant relationship before the first rent check clears. Here’s what every Texas commercial property owner should know before approving the next build-out.
What Is a Tenant Improvement Project?
A tenant improvement is any modification made to commercial space to prepare it for a specific tenant’s use. That can be as light as new paint, carpet, and signage, or as heavy as demolishing walls, relocating HVAC zones, adding restrooms, or building out a full restaurant kitchen.
In Texas, TI projects typically fall into three buckets:
- Cosmetic/light TI: Paint, flooring, ceiling tiles, lighting swaps. Usually $5–$25 per square foot.
- Standard office or retail TI: New walls, doors, electrical, basic plumbing, HVAC adjustments. Typically $40–$90 per square foot.
- Heavy or specialized TI: Restaurants, medical, dental, lab, or industrial conversions. Often $150–$400+ per square foot, especially with grease traps, medical gas, or kitchen exhaust.
The wide range is why every commercial TI build-out should start with a detailed scope — not a square-footage estimate scribbled on a lease term sheet.
Understanding the TI Allowance
The TI allowance (sometimes called a tenant improvement allowance or “TIA”) is the dollar amount a landlord agrees to contribute toward the build-out. It’s typically expressed as dollars per rentable square foot — for example, “$35/SF TI allowance on a 4,000 SF space” = $140,000.
How TI Allowances Are Typically Structured
- Turnkey build-out: Landlord delivers a finished space per agreed plans. Cost overruns are the landlord’s problem.
- Fixed allowance: Landlord pays up to a capped amount; tenant covers anything above.
- Reimbursement basis: Tenant pays contractors directly, then submits invoices and lien waivers for landlord reimbursement.
In most Texas markets in 2025, office TI allowances run $40–$80/SF for second-generation space and $80–$120/SF for first-generation shell. Retail and industrial tend to be lower; medical and restaurant tenants usually negotiate higher allowances paired with longer lease terms (often 7–10 years) to justify the investment.
What to Watch in the Lease
- Who controls the contractor selection? If you want quality control, retain landlord approval rights over the GC.
- Unused allowance: Does leftover TI revert to the landlord, get applied to rent, or get forfeited?
- Amortization: Some landlords roll over-allowance costs into the rent at an agreed interest rate.
- Permitting responsibility: Spell out who pulls permits, pays for code upgrades, and handles ADA compliance.
Choosing the Right Commercial Contractor in Texas
The single biggest predictor of a successful TI is the general contractor. Residential remodelers — even excellent ones — are not the right fit for most commercial work. You want a commercial contractor in Texas with relevant experience: similar building type, similar trade scope, and direct familiarity with your municipality’s permitting process.
What to Look For
- Licensing and insurance: Texas doesn’t license general contractors at the state level, but cities like Houston, Dallas, and Austin have specific registration and bonding requirements. Confirm general liability ($1M+/$2M aggregate is standard) and workers’ comp.
- Relevant portfolio: A contractor who has built three dental offices in Tarrant County will save you weeks compared to someone learning on your job.
- Permitting track record: Ask how long their last three permits took in your city. Austin and Houston commercial plan review can take 6–12 weeks; smaller suburbs may be 2–4.
- Subcontractor bench: Reliable MEP (mechanical, electrical, plumbing) subs are the difference between a 90-day build and a 150-day build.
- References from landlords, not just tenants.
Many of the same vetting principles in our guide on how to hire a contractor in Texas apply on the commercial side — just with more zeros attached.
Realistic TI Timelines
For a typical 3,000–8,000 SF Texas TI, expect:
- Design & pricing: 3–6 weeks (space plan, construction drawings, MEP engineering, GC pricing).
- Permitting: 2–12 weeks depending on city and scope. Houston, Austin, and Dallas commercial reviews are the slowest; San Antonio and most suburbs are faster.
- Construction: 6–16 weeks for office/retail; 16–30+ weeks for restaurants and medical.
- Final inspections, CO, and tenant move-in: 1–3 weeks.
Build a realistic schedule into the lease. A “60-day delivery” promise on a restaurant TI is how landlords end up paying for tenant rent abatement.
Texas-Specific Things to Watch
Climate and HVAC
Texas heat is hard on rooftop units. If you’re inheriting a 12-year-old RTU and a new tenant is adding heat-producing equipment (kitchen, server room, retail lighting), get a mechanical engineer to verify capacity early. Replacing or upgrading a 5–20 ton commercial unit mid-project can add $15,000–$60,000 and weeks of delay. Some of the same considerations from our [HVAC replac