Tenant Improvement Allowance Payback Calculator
See how long it takes a landlord to recover a tenant improvement allowance from rent — the payback period, the rent add-on to amortize it, and its share of lease value.
How it works
Payback months = allowance ÷ monthly rent · Straight-line add-on = allowance ÷ term
A tenant improvement (TI) allowance is money the landlord contributes to build out a space, and it only pencils if the lease rent recovers it. The simple payback period — allowance divided by monthly rent — shows how many months of rent equal the outlay, a fast gut-check on whether a deal’s term is long enough to justify the concession. Comparing the allowance to total lease value keeps generous build-outs from quietly erasing a deal’s profitability, since a TI that is a large share of lease rent leaves little margin.
Worked example
A $50,000 TI allowance against $6,000 monthly rent has a payback of about 8.3 months, is 16.7% of a 60-month ($360,000) lease, and would need a $833.33 monthly add-on to amortize straight-line over the term.
Frequently asked questions
How is the payback period calculated?
Divide the TI allowance by the monthly rent to get the number of months of rent equal to the allowance. It is a simple, before-financing measure — it ignores the time value of money — but it quickly shows whether the lease term comfortably covers the build-out.
How do landlords recover a TI allowance?
The cost is baked into the rent over the lease term, so a higher allowance generally supports a higher rent or a longer term. Amortizing the allowance across the term, sometimes with an interest factor, shows the rent premium it justifies.
What is a reasonable TI allowance?
It depends on market, space condition and lease length — quoted per square foot and typically larger for longer leases and shell spaces. A useful test is whether the allowance is a modest share of total lease rent, which this calculator reports.
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Educational estimate, not financial or investment advice.