Commercial Lease Concessions Benchmarks: Tenant Improvement Allowance, Free Rent and Fit-Out Costs (2026)

Allowances climbed every year from $67.37 in 2019 to a peak of $97.55 in 2023, then fell to $87.51 in 2024. Landlords have started pulling back, but they are still far more generous than before the pandemic.

Free rent followed the same arc, rising from 6.7 months in 2019 to 9.6 months in 2023 before easing to 8.9 months in 2024. These months are not adjusted for lease length, so a longer lease usually explains a bigger number.

San Francisco, San Jose and Seattle top the list at $228, $224 and $223 per square foot. The US average of $162 sits well above the 2024 average allowance, which tells you who usually pays the difference.

83% of contractors expect suppliers to raise prices and 63% plan to raise their own. Only 20% expect to absorb higher costs, so a bid you get today may not hold for long.

Office lease concessions by building tier, 2019 vs 2023 (2023 data through Q3 2023) (CBRE)

Source: CBRE, Office Effective Rents Have Declined; CBRE, Growth of Office Effective Rents Limited by Record-High Concessions. Download as image

CBRE office concession averages: recent snapshots

Source: CBRE, Office Building Owners Offering Fewer Concessions to Tenants; CBRE, Office Lease Concessions Like Free Rent and Tenant-Improvement Allowances Declined for First Time in 4 Years. Download as image

Federal tax rules that affect tenant improvement allowances

Source: Legal Information Institute, Cornell Law School (U.S. Code), 26 U.S. Code § 110 - Qualified lessee construction allowances for short-term leases; Legal Information Institute, Cornell Law School (U.S. Code), 26 U.S. Code § 168 - Accelerated cost recovery system; Internal Revenue Service, Treasury, IRS issue guidance on the additional first year depreciation deduction amended as part of the One, Big, Beautiful Bill (Notice 2026-11). Download as image

What is a good tenant improvement allowance in 2026?

Start with the 2024 average of $87.51 per square foot for new office leases in 12 big markets: Atlanta, Boston, Chicago, Dallas/Fort Worth, Denver, Houston, Los Angeles, Manhattan, Philadelphia, San Francisco, Seattle and Washington, D.C. If you are leasing in one of those cities and the offer comes in well below that, you have room to push.

Building quality matters. Through Q3 2023, top-tier buildings averaged $98.05 per square foot and lower-tier buildings $85.99. Lower-tier buildings had actually grown their allowances faster since 2019, up 52% against 37% for the best buildings. Owners of weaker space have had to spend more to compete.

Treat these as office benchmarks. Retail and industrial deals work differently, and a small suite in a suburban market will rarely see big-city numbers. Use the figures to frame your ask, not as a promise.

How many months of free rent should you get on a commercial lease?

The 2024 average on new office leases was 8.9 months, down slightly from 9.6 months in 2023. Top-tier buildings went further at the 2023 peak, averaging 10.1 months, while lower-tier buildings averaged 8.4 months.

Free rent scales with term. CBRE does not publish the average lease length behind these numbers, so do not compare your offer to the average without asking how long you are signing for. A short lease with a few free months can be a better deal than a long one with many.

Also check what free means in your draft. Many leases abate base rent only, so you still owe operating expenses, taxes and CAM charges during the free period. Some landlords take the free months back if you default later. Read the abatement clause line by line.

Does the TI allowance cover the full build-out?

Usually not. The US average fit-out cost in the 2026 guide was $162 per square foot, and gateway markets averaged $196. The allowance and the cost figures come from different samples and years, so the comparison is rough. Still, the direction is clear: in most deals, you fund part of the build yourself.

Costs are also moving. Fit-out prices across the Americas rose 5.5% in the 2026 edition, with US costs up about 5%. The Northeast led at 7%, and the Midwest was lowest at 2.1%. Get your contractor bid before you sign, and ask the landlord to fix the allowance against that bid, not against a guess.

Watch for a construction management fee charged against the allowance, a requirement to use the landlord's contractor, and a short deadline to spend the money. Each one shrinks what you actually receive.

Here is a simple way to size the gap. Take your contractor's price per square foot, subtract the allowance per square foot, and multiply by your rentable area. That is the cash you need on day one, before furniture, cabling or moving costs. If the number makes you wince, that is your cue to ask for a bigger allowance or a rent credit instead of more free months.

Are landlords cutting concessions?

A little. In 2024 both the allowance and free rent fell, the first decline in four years. Even so, concessions were still 30% higher than in 2019. Savills, using CompStak lease data, found office allowances weighted by deal size grew 112.0% from 2016 to 2025, though growth has slowed for four years in a row.

For you, that means the window for very rich packages is narrowing, especially in the best buildings. It does not mean landlords stopped paying. Ask for both money and time, then trade one against the other.

The mid-year numbers show how fast it turned. In the first half of 2024 the average allowance was still $94.69 per square foot with 9.0 months of free rent. By the full-year count it was $87.51 and 8.9 months. If a broker quotes you a number from the 2023 peak, ask which year it came from.

How do you negotiate a better concession package?

Landlords expect tenants to negotiate concessions. The ones who get the most usually show up with facts: a market benchmark, a real construction bid and a clear sense of what they would accept elsewhere. Here is the order that tends to work.

Small businesses often skip these steps because the lease feels standard. It is not. Every concession is a number someone chose, and the draft you receive is the landlord's opening position.

• Get a contractor bid or at least a test fit before you negotiate, so the allowance is tied to your real cost.
• Ask for the allowance as a fixed amount per square foot, payable directly to your contractor or reimbursed within a set number of days after you submit invoices.
• Push for free rent to start when your build is finished and you can open, not when you sign.
• Ask that free rent cover gross rent, including operating expenses and CAM, or at least spell out what you still owe.
• Cap or remove the landlord's supervision fee, and keep the right to pick your own contractor from an approved list.
• Ask that any unused allowance convert to a rent credit instead of disappearing.
• Limit restoration so you are not paying to tear out the same improvements the landlord helped fund.

How taxes change the value of an allowance

Under 26 U.S.C. 110, a retail tenant on a lease of 15 years or less can exclude a landlord's construction allowance from income, up to what it spends on the work. Interior improvements to nonresidential buildings are generally 15-year property, or 20 years under the alternative system, and IRS Notice 2026-11 covers the permanent 100% bonus depreciation for qualified property acquired after January 19, 2025.

Who owns the improvements on paper affects who claims the depreciation. Settle that in the lease and run it past your accountant before you sign.

Sources and method

Every number on this page comes from the sources below, each opened and read on or before October 18, 2026. A second, independent review checked every figure against its source and corrected anything that did not match. Figures that could not be confirmed were left out.

1. CBRE, Office Building Owners Offering Fewer Concessions to Tenants (March 6, 2025 (2024 lease data))
2. CBRE, Office Lease Concessions Like Free Rent and Tenant-Improvement Allowances Declined for First Time in 4 Years (August 29, 2024 (first half of 2024 lease data))
3. CBRE, Office Effective Rents Have Declined (December 20, 2023)
4. Savills (with CompStak data), How construction costs and TI allowances are reshaping office leases amid tariffs (October 16, 2025)
5. Cushman & Wakefield, Office Fit-Out Costs Across the Americas Rise 5.5% as Contractors Expect Further Increases, According to Cushman & Wakefield's 2026 Cost Guide (March 2026 (Office Fit Out Cost Guide Americas 2026))
6. Cushman & Wakefield, Office Fit Out Cost Guide Americas 2026 (March 2026 edition)
7. Legal Information Institute, Cornell Law School (U.S. Code), 26 U.S. Code § 110 - Qualified lessee construction allowances for short-term leases (Current U.S. Code as read October 2026)
8. Legal Information Institute, Cornell Law School (U.S. Code), 26 U.S. Code § 168 - Accelerated cost recovery system (Current U.S. Code as read October 2026)
9. Internal Revenue Service, Treasury, IRS issue guidance on the additional first year depreciation deduction amended as part of the One, Big, Beautiful Bill (Notice 2026-11) (January 14, 2026 (IR-2026-06))
10. CBRE, Growth of Office Effective Rents Limited by Record-High Concessions (December 20, 2023 (data through Q3 2023))