Tenant Improvements vs. Landlord’s Work Letter

The tenant improvement allowance tells you how much money may be available. The work letter tells you what actually gets built, by whom, and under what rules.

Originally published January 2013. Updated September 2026 to reflect current tenant improvement and owner-side project practices.

A landlord offers a generous tenant improvement allowance.

That sounds good.

But before deciding whether the deal is good, I would want to see the work letter.

“What exactly are we getting for the money?”

The tenant improvement allowance and the work letter are related, but they are not the same thing.

The allowance addresses funding.

The work letter helps establish scope, responsibility, control, approvals, schedule and how the improvements will actually be delivered.

For a tenant evaluating competing spaces, both matter.

Start With the Scope, Not Just the Allowance

A TI allowance expressed as dollars per square foot makes different lease proposals appear easy to compare.

They may not be.

One landlord may deliver certain improvements as part of its base building or turnkey scope. Another may expect those same items to come from the tenant’s allowance.

Items such as HVAC modifications, electrical distribution, supplemental cooling, window treatments, life-safety work, telecommunications infrastructure, demolition, permits and professional fees can materially affect the amount of money actually available for the tenant’s space.

So I would not compare two proposals solely by asking:

“How much TI are they giving us?”

I would compare what each landlord is providing and what remains the tenant’s responsibility.

The Work Letter Is Part of the Project Strategy

The work letter should translate the business deal into project responsibilities.

Depending on the transaction, it may address:

• Who prepares the design and construction documents?

• Who hires and controls the contractor?

• What work is included in the landlord’s scope?

• What is paid from the TI allowance?

• What costs are excluded from the allowance?

• What building standards must be followed?

• What approvals are required?

• Are there landlord administrative, supervisory or review fees?

• Who pays for changes?

• What happens if the work exceeds the allowance?

• What conditions must be satisfied before construction begins?

• How are schedule responsibilities and delays addressed?

• What documentation is required for reimbursement?

Those details can matter just as much as the allowance itself.

Turnkey Does Not Mean the Tenant Can Stop Paying Attention

In a landlord-delivered or turnkey build-out, the landlord may control much of the construction process.

That can simplify delivery for the tenant.

It does not eliminate the tenant’s need to understand the scope.

If an item is missing from the work letter or construction documents, discovering it after the lease is signed—or worse, after construction—is a poor time to determine who was supposed to provide it.

A finished office can still be missing something operationally important.

The question is whether the tenant’s requirements were clearly translated into the landlord’s construction obligation before work began.

What If the Tenant Controls the Construction?

Some transactions allow the tenant to manage its own design and construction using the TI allowance or a negotiated contribution from the landlord. The choice between a landlord-delivered and tenant-managed build-out affects control, responsibility, cost and risk.

That gives the tenant greater direct control over design, procurement and project decisions.

It also gives the tenant greater responsibility.

The tenant may now need to manage designers, contractors, permits, building requirements, insurance, schedule, cost, landlord approvals and coordination with base-building systems.

Greater control is valuable only if the tenant has the organization and project leadership to exercise it.

The Cheapest Build-Out Is Not Necessarily the Best Deal

During lease negotiations, construction cost can easily become another number in the transaction.

But the lowest initial build-out cost does not necessarily produce the best occupancy outcome.

A tenant also needs to consider:

• whether the space meets operational requirements;

• whether building systems can support the intended use;

• whether the schedule aligns with lease expiration and occupancy;

• whether landlord standards constrain design or technology;

• what happens when requirements change;

• who carries cost and schedule risk; and

• what obligations remain after turnover.

Those issues can materially change the economics of a seemingly attractive lease.

Compare the Whole Deal

Before selecting a space, I would want the broker, project team and tenant to compare more than rent and TI dollars.

Put the competing proposals side by side.

What is included?

What is excluded?

Who controls the work?

What fees apply?

What assumptions have been made?

What happens above the allowance?

Who owns the schedule risk?

And what does the tenant ultimately receive at occupancy?

A large TI allowance can still produce a poor project if the underlying scope and responsibilities are unclear.

Leadership takeaway: Don’t evaluate a tenant improvement package by the allowance alone. Understand the work letter, scope, responsibilities, controls and risks that determine what those dollars will actually deliver.