Last updated October 2026
The better build-out deal is the one that puts cost risk where it belongs for your situation. With a turnkey build-out, the landlord designs, builds, and pays for an agreed plan, so overruns are the landlord’s problem. With a tenant improvement (TI) allowance, the landlord gives you a fixed budget, typically $6 to $8 per SF per year of lease term in the transactions we track and negotiate, and you control the design, keep the savings, and cover any overage. Since 2004, Tenant Advisors has negotiated more than 2,000 office leases for tenants of 3,000 to 50,000 SF, and the right choice depends on how custom the space is, your timeline, and who should manage construction.
Key Takeaways
- A turnkey deal shifts construction cost risk to the landlord. A fixed allowance gives you control of design and contractors, and the risk of overages.
- Allowances scale with lease term: about $30 to $40 per SF on a 5-year lease and $60 to $80 on a 10-year lease.
- Turnkey works best for standard layouts and tight timelines. An allowance works best for custom space or tenants with a clear plan and a budget cushion.
- Either way, the work letter decides what you actually get.
- One headquarters tenant used rising construction costs to push the landlord into a turnkey build-out and cut effective net rent 26%.
How Do the Two Approaches Differ?
In a turnkey deal, you and the landlord agree on a space plan and a finish level before the lease is signed. The landlord hires the architect and contractor, manages the job, and delivers the space ready to occupy. If prices rise or the job runs over, the landlord absorbs it, as long as you do not change the approved plan.
With an allowance, the landlord commits a dollar amount, and you decide how to spend it. You can bid the job to several contractors, choose your own finishes, and sometimes apply unused dollars to rent, if the lease says so. The trade-off is that anything over the allowance comes out of your budget. Either structure can be negotiated alongside rent abatement; our post on what concessions Chicago landlords give covers the full package.
| Factor | Turnkey build-out | TI allowance |
|---|---|---|
| Who designs and manages construction | Landlord | Tenant, or landlord at tenant’s direction |
| Who pays cost overruns | Landlord, unless the tenant changes the plan | Tenant |
| Who keeps the savings | Landlord | Tenant, if unused dollars convert to rent credit |
| Control over finishes and contractors | Limited to the agreed plan and spec | Full, within building rules |
| Typical value | The cost of the agreed plan | About $6 to $8 per SF per year of term |
| Best fit | Standard layouts, tight timelines, no internal project staff | Custom space, clear requirements, budget cushion |
Based on the transactions we track and negotiate as of October 2026. Terms vary by building, landlord, and lease length.
What Is an Allowance Worth in Real Dollars?
Because the allowance is tied to the length of the lease, the same space can carry very different budgets. Take an 8,000 SF office in the O’Hare market, where Class A space runs about $38 to $43 per SF gross in the transactions we track and negotiate. At $40 per SF, annual rent is $320,000.
- On a 5-year lease, an allowance of $30 to $40 per SF comes to $240,000 to $320,000, or roughly 9 to 12 months of rent.
- On a 10-year lease, $60 to $80 per SF comes to $480,000 to $640,000.
- On top of either, rent abatement of about 1 to 2 months per year of term is common, or 5 to 10 months on a 5-year lease.
That is why we compare a turnkey offer and an allowance offer on total occupancy cost over the full term. A turnkey proposal has no stated dollar figure, so the first step is to price the landlord’s plan and check it against what the allowance would buy.
When Does Letting the Landlord Build Make More Sense?
A landlord-managed build-out tends to fit when the layout is fairly standard, the move date is firm, and nobody on your team has time to manage a construction project.
One headquarters tenant was in dated space twice the size it needed. We toured 12 Class A buildings, narrowed the list to 4 finalists, and ran a head-to-head bidding process. We used construction cost escalation as a negotiating lever to push the winning landlord to turnkey the buildout. The result was 26% lower effective net rent, plus rent abatement, and extensive turnkey improvements delivered during a period of rapidly escalating construction costs. Read the full case.
When Should You Control the Construction Yourself?
A fixed budget is usually the better choice when the space needs to be specific to your business or when you want to bid the work and keep the savings. It also fits renewals, where a refurbishment allowance can go toward new paint and carpet or, if negotiated, convert to rent credit. Our lease renewal negotiation work often includes exactly that trade.
What Should the Work Letter Spell Out?
The work letter is the part of the lease that governs construction, and it matters more than the headline number. We look for:
- An attached space plan and a defined finish level, not just “building standard.”
- Which costs the allowance covers: architecture, permits, cabling, signage, and moving.
- A cap on the landlord’s construction management fee.
- Rent that starts when the space is substantially complete, with day-for-day relief if the landlord is late.
- The right to apply unused allowance to rent, and enough time to spend it.
These terms are far easier to win before the lease is signed, which is why our office lease negotiation and relocation and site selection work prices the build-out alongside the rent. Because we represent only tenants, never landlords, there is no question about which side of the work letter we are on.
If you are comparing proposals or planning a move in the next 12 to 18 months, contact us to talk through the build-out options. Because the landlord pays our fee, there is no cost to tenants.
Frequently Asked Questions
What does a landlord-built office deal include?
A turnkey build-out means the landlord designs, builds, and pays for an agreed space plan and delivers the office ready to occupy. If construction costs come in higher than expected, the landlord absorbs the difference, as long as the tenant does not change the approved plan.
How much build-out money should an office tenant expect?
In the transactions we track and negotiate, the allowance typically runs $6 to $8 per SF per year of lease term. That is about $30 to $40 per SF on a 5-year lease and $60 to $80 per SF on a 10-year lease, so a longer term usually means a larger budget.
Can unused construction dollars be applied to rent?
Sometimes, if the lease says so. Many landlords will agree to let a portion of unused allowance convert to rent credit, but the right has to be negotiated into the work letter before signing, along with a deadline to use the funds.
Who pays if construction costs more than the budget?
With a fixed allowance, the tenant pays any overage. With a turnkey deal, the landlord pays for the agreed plan, and the tenant pays only for changes it requests after the plan is approved.
About the authors: Tom Koelzer and Dave Ven Horst co-founded Tenant Advisors in 2004 and have represented only office tenants ever since, never landlords. The firm has negotiated more than 2,000 office leases across the Northwest Suburbs, O’Hare, the East-West Corridor, the North Suburbs, and the Chicago CBD. Questions about your build-out? Contact us or call (847) 778-0296.