Tenant Improvement General Contractor Services

Tenant improvement (TI) construction occupies a specialized segment of the commercial contracting industry, covering the buildout or renovation of leased commercial spaces to meet a specific tenant's operational requirements. This page defines the scope of TI work, explains how general contractors execute these projects within lease and landlord frameworks, outlines the most common project scenarios, and identifies the decision boundaries that determine when a TI general contractor is appropriate versus other delivery methods. Understanding TI construction is essential for landlords, tenants, property managers, and real estate attorneys who negotiate and execute commercial leases with construction components.

Definition and scope

A tenant improvement project involves physical modifications to an existing commercial space — office, retail, medical, restaurant, or industrial — that a tenant occupies under a lease agreement. The general contractor engaged for TI work is responsible for converting raw shell space or repurposing an existing build-out to meet the incoming tenant's specific layout, code compliance, and finish requirements.

TI work is classified within commercial general contractor services but carries distinct contractual and financial structures not present in conventional owner-occupied construction. The most important distinction is the landlord-tenant-contractor triangle: the general contractor may be hired by the landlord, by the tenant, or by both under different contractual arrangements depending on who controls the TI allowance.

The scope of a TI engagement typically encompasses:

Demolition of existing partitions, ceiling systems, and finishes
Rough and finish carpentry, framing, and drywall
Mechanical, electrical, and plumbing (MEP) rough-in and trim
Ceiling grid and tile installation
Flooring, paint, and millwork
Life-safety systems: sprinklers, fire alarms, and egress lighting
Permit acquisition and inspections through project closeout

The General Services Administration (GSA) publishes space planning standards for federal tenant buildouts that define finish categories and allowance benchmarks used as reference points across the commercial real estate industry (GSA Facilities Standards for the Public Buildings Service, PBS-P100).

How it works

A TI project is initiated when a commercial lease is executed with a TI allowance clause. The allowance, typically expressed in dollars per rentable square foot, is funded by the landlord and defines the baseline construction budget the tenant can draw upon. Allowances in Class A office markets have historically ranged from $50 to over $150 per square foot depending on building class, market, and lease term, though specific figures are negotiated transaction by transaction.

The general contractor's scope of work documentation becomes the contractual basis for determining what work falls within the allowance versus what constitutes tenant overages — costs the tenant must pay directly. The contractor holds a formal contract with either the landlord or the tenant, and in some structures, a dual-party arrangement exists.

Permit acquisition is a primary GC responsibility in TI work. Because the space is within an existing permitted building, the TI contractor must pull tenant improvement permits, which are reviewed against base building structural and MEP capacity. This process is covered in detail under general contractor permit-pulling responsibilities.

The payment mechanism in TI construction typically follows one of three structures:

Landlord-controlled GC: The landlord selects and contracts the GC, manages draws against the allowance, and delivers a completed space to the tenant.
Tenant-controlled GC: The tenant selects and contracts the GC directly, receives the allowance as a reimbursement or draws from a landlord-held escrow account upon construction milestones.
Turnkey delivery: The landlord delivers a fully built space to a defined specification, absorbing all construction risk and cost overrun exposure.

Change orders represent a frequent source of budget deviation in TI projects. The change order process for general contractors governs how scope additions are priced, approved, and allocated between the allowance and tenant overage accounts.

Common scenarios

Office build-out: A corporate tenant leases raw shell space in a Class B office building. The GC frames private offices and conference rooms, installs a raised access floor for cabling, and finishes to the tenant's brand standards. MEP is extended from base building infrastructure.

Medical or dental office: Heightened plumbing rough-in density, medical gas lines, lead-lined exam rooms, and ADA compliance requirements under the Americans with Disabilities Act (42 U.S.C. § 12101 et seq.) distinguish medical TI from standard office work. Permit review cycles are longer and inspection hold points are more frequent.

Restaurant conversion: A food service tenant converting a former retail bay requires exhaust hood infrastructure, grease interceptors, Type 1 hood systems, and health department approvals in addition to standard building permits. This scenario carries the highest cost-per-square-foot of common TI types.

Retail refresh: An existing tenant renews a lease and negotiates a partial allowance to refresh finishes, reconfigure checkout areas, and update lighting to LED standards. Scope is limited compared to a full build-out, and project timelines typically run 4 to 8 weeks.

Decision boundaries

The primary decision boundary is whether to engage a design-build general contractor versus a conventional GC operating from landlord-provided construction drawings. Design-build consolidates design and construction accountability under one contract, which reduces coordination friction in complex TI scenarios (restaurant, medical) but typically costs more than design-bid-build on straightforward office work.

A second boundary concerns licensing. TI contractors must hold the appropriate state contractor license for the work category performed. Commercial buildout licensing requirements vary significantly by jurisdiction, as documented under general contractor licensing requirements by state. A GC licensed for commercial work in one state may not qualify in another without additional examination or reciprocity.

Insurance and bonding thresholds also shift in TI work. Landlords routinely require tenants and their contractors to carry minimum commercial general liability limits of $2,000,000 per occurrence and $4,000,000 aggregate, plus additional insured endorsements naming the landlord and property management company. Requirements are documented under general contractor insurance requirements.

Finally, the decision to use a TI general contractor versus construction management versus general contracting turns on risk allocation preference. A construction manager at-risk model shifts cost certainty to the CM firm; an agency CM model places budget risk on the tenant or landlord. For most TI projects under 20,000 square feet, a conventional GC with a stipulated-sum contract delivers the simplest risk structure.

References

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