What Are Tenant Improvements? A Complete Guide for Business Owners and Property Managers
What Are Tenant Improvements? A Complete Guide for Business Owners and Property Managers breaks down the purpose and value of customizing commercial spaces to meet operational needs. Tenant improvements (TIs) allow businesses to adapt leased space to their layout, branding, and code requirements — and they’re essential to long-term success.
Introduction
What Are Tenant Improvements? A Complete Guide for Business Owners and Property Managers explores a vital part of Portland’s commercial real estate ecosystem. Tenant improvements, or TIs, are the custom renovations or alterations made to a commercial space to better serve a tenant’s functional or aesthetic needs. These can range from basic interior upgrades to full-scale build-outs involving major MEP (mechanical, electrical, plumbing) changes and code compliance updates.
At Modern NW, we specialize in high-performance commercial tenant improvements throughout Portland and the surrounding region. This guide is designed to help business owners, landlords, and property managers better understand the TI process, when to use it, who pays for it, and how it adds measurable value to any commercial property.
What Are Tenant Improvements?
Tenant improvements refer to the physical changes made to a leased space — typically by the tenant or property owner — to accommodate specific business needs. These may include:
- Building new interior walls or reconfiguring floor layouts
- Installing or upgrading break rooms, restrooms, or reception areas
- Modifying electrical, plumbing, HVAC, and lighting systems
- Updating interior finishes such as flooring, paint, or ceiling tiles
- Ensuring ADA compliance or other regulatory updates
- Adding specialized infrastructure (e.g., data cabling, medical-grade HVAC, or display areas)
In short, TIs transform an empty or outdated shell into a functional, tailored environment. They serve a business’s operational goals while aligning with branding, customer service standards, and employee needs.
Who Pays for Tenant Improvements?
A common question is: who foots the bill for tenant improvements? The answer depends on your lease structure.
In many commercial leases, the landlord offers a Tenant Improvement Allowance (TIA) — a per-square-foot contribution toward the renovation. The tenant may then cover any costs beyond that allowance, especially if the improvements are highly customized.
The three most common scenarios:
- Landlord-funded TIs: Landlord offers a fixed TIA as a lease incentive.
- Tenant-funded TIs: Tenant bears all costs, especially in short-term leases.
- Shared costs: Both parties contribute based on negotiations.
TI allowances can vary widely based on lease term, market demand, property condition, and tenant creditworthiness. For example, a long-term corporate tenant in a Class A building may receive a substantial allowance, while a startup leasing a small space in a Class B or C property may have less leverage.
Working with an experienced contractor like Modern NW ensures accurate cost estimating and value engineering, so both landlord and tenant can make informed decisions early in the process.
Why Tenant Improvements Matter
In a competitive leasing market like Portland, tenant improvements are more than just cosmetic upgrades — they’re business drivers. Here’s why they matter:
For Business Owners:
- Improve workflow efficiency with purpose-built layouts
- Reinforce brand identity through finishes and signage
- Enhance employee productivity with better lighting, soundproofing, or amenities
- Ensure compliance with ADA, fire, and health regulations
- Create a more welcoming space for customers and clients
For Property Managers:
- Reduce vacancy time by offering move-in ready spaces
- Increase tenant retention through customization options
- Boost property value with modern systems and finishes
- Command higher rents in a competitive market
- Stay competitive with nearby properties offering similar features
The Tenant Improvement Process with Modern NW
Every successful TI project begins with a clear plan and a reliable partner. At Modern NW, our process is built to minimize disruption and maximize value.
Step 1: Consultation & Scope Definition
We meet with all stakeholders — landlord, tenant, and design team — to understand goals, budgets, timelines, and priorities. Whether it’s a Class A office or a light industrial facility, this early alignment prevents surprises.
Step 2: Design & Permitting
We collaborate with architects and engineers, finalize drawings, and manage permit submissions through the City of Portland’s Bureau of Development Services. We also ensure all TI work complies with fire, energy, and ADA codes.
Step 3: Construction
Our in-house project managers coordinate demolition, trades, material deliveries, and quality control — keeping timelines tight and disruption minimal. We also implement noise and dust mitigation strategies, especially in occupied buildings.
Step 4: Punch Walk & Delivery
We perform detailed inspections and walkthroughs to ensure all TI work meets expectations, code requirements, and functional goals. Documentation and close-out materials are provided to all stakeholders for transparency.
Common Types of Tenant Improvements
Different types of businesses require different TI scopes. Here are some examples from real-world projects:
1. Professional Offices
Additions may include private offices, conference rooms, branded lobbies, and acoustic ceiling tiles.
2. Retail Build-Outs
Display areas, upgraded lighting, security systems, and custom millwork are common.
3. Industrial/Flex Spaces
Open layouts, high-load flooring, upgraded electrical capacity, and specialized HVAC are frequently requested.
4. Medical & Dental Offices
TIs often include soundproof treatment rooms, medical-grade materials, and advanced plumbing and electrical systems.
Modern NW has experience across all of these sectors and tailors its approach to match business objectives and timelines.
Key Considerations Before Starting a TI Project
Before starting a tenant improvement project, both landlords and tenants should be clear on:
- Lease terms: Who pays? Who owns the improvements after the lease ends?
- Timing: How long will the project take, and will the space remain occupied?
- Scope and design approvals: Does the landlord require oversight on finishes, layout, or signage?
- Permit duration and impact: How long will permitting take in the jurisdiction? Will it affect move-in or rent commencement?
These questions help set expectations and avoid delays.
Local Context: Portland’s TI Landscape
Portland is known for its environmentally progressive values and mixed-use neighborhoods. These values influence the types of improvements most frequently requested — including energy-efficient upgrades, daylighting features, and sustainable materials.
Incentives through Energy Trust of Oregon and local programs such as PACE financing help businesses reduce the upfront cost of TI projects with a sustainability component.
Commercial landlords who embrace these trends in collaboration with tenants are seeing higher occupancy rates and greater long-term returns.
External Sources
- City of Portland Bureau of Development Services – TI Permits
- Energy Trust of Oregon – Commercial Tenant Improvement Incentives
- NAIOP – Best Practices in Tenant Improvements
Conclusion
What Are Tenant Improvements? A Complete Guide for Business Owners and Property Managers is more than just a how-to — it’s a blueprint for creating functional, high-performing commercial spaces. From improving operational flow to enhancing brand presence and retaining valuable tenants, the benefits of well-executed TIs are clear.
Whether you’re a landlord looking to increase ROI or a business aiming to create a more effective workspace, Modern NW is here to help. Our consultative, streamlined process ensures your project is delivered on-time, on-budget, and built to perform.
📞 Let’s build your next space together. Contact Modern NW today to discuss your upcoming tenant improvement project.