Commercial Tenant Improvement Guide for Bay Area Businesses (2026)

What Is a Tenant Improvement?

A tenant improvement (TI) is any modification made to a leased commercial space to meet the specific needs of a business tenant. These changes can range from cosmetic updates like fresh paint and new flooring to major structural work like adding walls, installing commercial kitchens, or building out medical exam rooms.

Tenant improvements are distinct from standard maintenance. They are purpose-driven modifications that transform a generic commercial shell into a functional space tailored to your business operations, brand identity, and customer experience.

Common examples include:

• Office spaces: Conference rooms, private offices, reception areas, server rooms, break rooms
• Retail stores: Display fixtures, fitting rooms, POS stations, storage, custom lighting
• Restaurants and cafes: Commercial kitchens, exhaust hoods, grease traps, bar buildouts, seating areas
• Medical offices: Exam rooms, procedure rooms, HIPAA-compliant layouts, specialized plumbing, X-ray shielding

In the Bay Area, where commercial real estate costs are among the highest in the nation, getting your tenant improvement right the first time is essential. Mistakes during buildout cost more than just money; they cost you revenue-generating weeks and months of delayed opening.

Understanding TI Allowances

What Is a TI Allowance?

A tenant improvement allowance (TIA) is a contribution from the landlord toward the cost of building out your space. It is typically expressed as a dollar amount per square foot and negotiated as part of your lease agreement. The allowance is not a cash payment to you. It is a credit applied against construction costs for the leased space.

Current Bay Area TI Allowance Ranges

The Bay Area commercial real estate market has shifted significantly in recent years. Office vacancy rates in San Francisco hover around 37%, creating a tenant-favorable market where landlords offer aggressive concessions to attract and retain quality tenants.

Here is what you can expect to negotiate:

Space Type	Typical TI Allowance (Bay Area)	National Average
Class A Office (SF)	$120-$135/sqft	$40-$60/sqft
Class A Office (South Bay)	$80-$110/sqft	$40-$60/sqft
Standard Office	$50-$80/sqft	$25-$43/sqft
Retail	$40-$75/sqft	$15-$35/sqft
Medical	$60-$100/sqft	$30-$50/sqft

These figures reflect market conditions where landlords are competing for creditworthy tenants. Your actual allowance depends on several factors.

How to Negotiate a Better TI Allowance

Negotiation leverage depends on your position as a tenant. Here are the factors that strengthen your hand:

Lease length. A 10-year lease commitment gives the landlord more time to recoup their investment, which justifies a higher TI allowance. Tenants signing 3-year leases will receive significantly less.

Tenant creditworthiness. Landlords assess your business’s financial stability. Established businesses with strong revenue history and good credit receive better terms than startups.

Base rent commitment. A higher base rent often correlates with a more generous TI allowance. The landlord can amortize the improvement cost over the lease term at the higher rate.

Market vacancy. In a high-vacancy market like the current Bay Area office sector, landlords have less leverage. Use comparable vacancy data from the submarket to support your request.

Building condition. A cold shell (bare concrete, no HVAC, no ceiling) requires more buildout work and justifies a larger allowance than a previously built-out space that only needs cosmetic updates.

Turnkey vs. allowance. Some landlords prefer turnkey buildouts, where they manage and pay for construction directly rather than providing a cash allowance. This can work in your favor if the landlord has a reliable contractor relationship, but it gives you less control over the process.

Types of Tenant Improvements

Not all improvements are created equal, and the classification matters for your lease negotiation, tax treatment, and permit requirements.

Cosmetic Improvements

Paint, carpet, lighting fixtures, and minor finish work. These generally do not require permits and fall on the lower end of cost. Budget $15-$40 per square foot for cosmetic-only work.

Standard Buildout

Partition walls, ceiling grids, basic electrical and data wiring, HVAC distribution, and standard finishes. This covers most office and retail environments. Budget $80-$150 per square foot in the Bay Area.

Specialty Buildout

Specialized infrastructure for restaurants, medical offices, labs, and similar high-requirement spaces. This includes commercial plumbing, grease interceptors, ventilation hoods, specialized electrical, reinforced flooring, and sound isolation. Budget $150-$500+ per square foot depending on requirements.

Structural Modifications

Removing or adding load-bearing walls, cutting new openings, reinforcing floors for heavy equipment, or adding mezzanines. These require structural engineering and are the most expensive category. Costs depend entirely on scope and existing building conditions.

Cost Ranges by Space Type

Bay Area construction costs run 30-50% above national averages due to higher labor rates, stricter building codes, and longer permit timelines. Here are realistic 2026 cost ranges for tenant improvements:

Space Type	Cost per Square Foot	Key Cost Drivers
Standard Office	$80-$150	Partition walls, data/electrical, HVAC distribution, finishes
Creative/Open Office	$100-$180	Exposed ceilings, polished concrete, custom lighting, collaborative spaces
Retail (General)	$100-$250	Storefront modifications, display infrastructure, branding elements
Restaurant/Cafe	$150-$350	Commercial kitchen, exhaust hood, grease trap, plumbing, health code compliance
Medical Office	$200-$500+	Exam rooms, specialized HVAC, plumbing, X-ray shielding, HIPAA layout requirements
Dental Office	$250-$450	Chair-side infrastructure, compressed air, vacuum systems, sterilization areas

These ranges cover construction costs only. Design fees, permit fees, furniture, fixtures, and equipment (FF&E) are additional.

What Drives Costs Higher

Several factors push Bay Area TI costs above these base ranges:

• Building age and condition. Older buildings often require asbestos abatement, seismic upgrades, and code-triggered improvements that add significant cost.
• Change of use. Converting a retail space to a restaurant or an office to a medical suite triggers additional code requirements and permit reviews.
• High-rise vs. ground-floor. Work above the ground floor adds logistics costs for material delivery, debris removal, and noise/vibration restrictions.
• Historic preservation. San Francisco and some other Bay Area cities have historic preservation requirements that limit exterior changes and sometimes interior modifications.

Permits and Approvals

When Permits Are Required

In nearly every Bay Area city, building permits are required for tenant improvements that involve:

• Structural modifications (adding or removing walls)
• Electrical work (new circuits, panel upgrades, data wiring)
• Plumbing changes (adding sinks, relocating drains, gas lines)
• HVAC modifications (new ductwork, equipment installation)
• Fire suppression system changes (sprinkler relocation, fire alarm upgrades)
• Accessibility modifications (restroom upgrades, entrance changes)

Even work that seems cosmetic can trigger permit requirements if it affects egress paths, fire-rated assemblies, or accessibility.

Permit Timelines by City

Permit processing times vary significantly across Bay Area jurisdictions:

City/County	Initial Review	Total Permit Timeline
San Jose	4-8 weeks	2-5 months
San Francisco	4-12 weeks	3-6 months
Palo Alto	3-6 weeks	2-4 months
Mountain View	3-6 weeks	2-4 months
Santa Clara County	4-8 weeks	2-5 months

These timelines assume a complete application with no plan check corrections. Projects requiring a change of use can add 8-10 months for the approval process before you even submit to the building department. Factor permit timelines into your lease start date and opening projections.

Required Documentation

A complete permit application for a commercial tenant improvement typically includes:

• Architectural floor plans prepared or stamped by a licensed architect
• Structural engineering calculations (if applicable)
• Mechanical, electrical, and plumbing (MEP) plans
• Title 24 energy compliance documentation
• Fire and life safety plans
• ADA/accessibility compliance plans
• Landlord authorization letter

Working with a design-build firm like Custom Home that handles both design and construction means your plans are created with buildability and code compliance in mind from day one. This reduces plan check corrections and keeps your permit timeline on track.

ADA Compliance in California

ADA compliance is not optional, and California’s requirements go beyond the federal minimums. Understanding your obligations before you start design avoids costly redesigns and legal exposure.

California Building Code Section 1134B

California requires that tenant improvement projects dedicate a portion of construction costs toward accessibility upgrades:

• Projects below the valuation threshold: Must allocate at least 20% of improvement costs toward disabled access improvements
• Projects exceeding the threshold: Require full accessibility compliance for the entire tenant space

What ADA Compliance Covers

Required accessibility features for commercial tenant improvements include:

• Accessible entrance: At least one entrance that is wheelchair-accessible with proper clearances and hardware
• Path of travel: A clear, accessible path from the entrance to the primary function area of the space
• Restrooms: ADA-compliant restrooms with proper dimensions, grab bars, clearances, and hardware
• Signage: Tactile and Braille signage for permanent rooms and spaces
• Counter heights: A portion of service counters must be at accessible height (34 inches maximum)
• Parking: Required accessible parking spaces if the tenant controls parking areas

Shared Responsibility

ADA compliance obligations are shared between landlord and tenant. Generally:

• The landlord is responsible for common areas, building entrances, elevators, lobbies, and shared restrooms
• The tenant is responsible for accessibility within their leased space and any improvements they make
• Both parties can negotiate specific responsibilities in the lease agreement

Include ADA compliance costs in your project budget from the start. Retrofitting for accessibility after construction is always more expensive than designing it in from the beginning.

The Tenant Improvement Process

A well-managed tenant improvement follows a predictable sequence. Here is what to expect:

Phase 1: Assessment and Planning (1-2 Weeks)

Walk the space with your contractor and design team. Assess the existing condition, identify infrastructure that can be reused, and define functional requirements. This is when you determine whether the space truly works for your intended use before committing significant design dollars.

Phase 2: Design and Budgeting (2-4 Weeks)

Your design team creates detailed floor plans, 3D visualizations, and material specifications. At Custom Home, our design-first process gives you a complete picture of your finished space before construction starts, including an itemized scope and budget aligned to your business plan.

Phase 3: Permitting (4-8+ Weeks)

Submit plans to the local building department and any other required agencies (health department for restaurants, fire marshal for assembly occupancies). Respond to plan check comments and obtain approvals. This phase runs on the jurisdiction’s timeline, not yours. Plan accordingly.

Phase 4: Construction (6-16 Weeks)

Demolition, rough framing, mechanical/electrical/plumbing rough-in, inspections, drywall, finishes, and final installations. Construction duration depends on scope. A standard office buildout of 3,000-5,000 square feet typically takes 8-12 weeks. A full restaurant buildout with commercial kitchen can take 12-16 weeks or more.

Phase 5: Inspections and Occupancy (1-2 Weeks)

Final building inspections, fire marshal sign-off, health department approval (if applicable), and certificate of occupancy issuance. Once you receive your CO, you can legally open for business.

Total Timeline Estimate

Space Type	Typical Total Timeline
Standard Office	12-18 weeks
Retail	14-20 weeks
Restaurant/Cafe	20-30 weeks
Medical Office	20-32 weeks

These estimates assume a clean permit process with no major revisions. Add buffer time to your business plan for the unexpected.

How to Control TI Costs

Choose Design-Build

The single most effective way to control costs and timeline on a tenant improvement is to work with a design-build firm. When one team handles both design and construction, you eliminate the coordination gaps, finger-pointing, and redesign cycles that plague the traditional architect-then-bid-then-build approach.

Custom Home’s design-build process gives you a complete 3D visualization and itemized budget before any construction begins. You make decisions with full visibility into costs, not after the framing is already up.

Plan for Contingency

Budget a 10-15% contingency for unforeseen conditions. Older buildings frequently reveal surprises behind walls and above ceilings: outdated wiring, asbestos-containing materials, structural deficiencies, or plumbing that does not meet current code.

Maximize Existing Infrastructure

Reusing the previous tenant’s HVAC ductwork, electrical panels, plumbing rough-ins, and ceiling grids can save 20-30% on construction costs. Evaluate what is usable during your initial assessment.

Coordinate with Your Landlord

Establish clear communication with your landlord about scope, timeline, and responsibilities early. Confirm what work requires landlord approval, whether the building has any construction restrictions (noise hours, elevator reservations, loading dock access), and how inspections and sign-offs will be coordinated.

Ready to Start Your Tenant Improvement?

Whether you are opening a new restaurant, expanding your medical practice, or building out office space for a growing team, the right contractor makes the difference between opening on time and watching your lease clock tick while construction stalls.

Custom Home brings the same design-first, single-point-of-accountability approach to commercial buildouts that we use for our residential projects. You see your space in 3D before we start. Every permit is handled in-house. And your buildout stays on the timeline your business depends on.

Contact Custom Home today to discuss your commercial tenant improvement project. We will walk your space, assess the scope, and give you realistic numbers and timelines you can build your business plan around.