9.23.2025
We’ve helped leading brands use TI funds strategically for interior design investments that elevate spaces and lead to amazing customer experiences.
In this guide, we discuss all the intricacies and technicalities of using TI funds for interior design needs.
Yes, you can. Tenant improvement funds are widely used to pay for interior design driven build outs in retail settings, so long as the lease language allows it. In most markets, TI allowances are negotiated to cover both the invisible infrastructure that makes a space functional and the visible finishes, fixtures, and details that make a space on brand. Industry bodies and commercial real estate practitioners treat interior design scope as a standard and often essential part of the TI conversation.
Why this is true, with evidence. The Building Owners and Managers Association International explains that TI allowances exist to customize space to a tenant’s operational needs, which typically include walls, ceilings, lighting, millwork, and finishes that are central to interior design. The International Council of Shopping Centers regularly publishes guidance on retail leasing that notes how successful deals tie the allowance directly to brand aligned build outs rather than only to base building infrastructure. When a project pursues sustainability or energy performance targets, design driven lighting and material selections can also help with certification goals recognized by the U.S. Green Building Council and can reduce operating costs measured by the U.S. Department of Energy. These organizations treat interior outcomes as legitimate and measurable parts of TI funded scopes.
The most straightforward proof comes from market practice. In New York, Newark, Philadelphia, and Chicago, retail tenants routinely use TI allowances for upgrades that are inherently interior design decisions. Examples include lighting systems that highlight merchandise, premium fitting room suites, experiential zones with specialty millwork, and durable yet elevated flooring and wall finishes. These are not nice to have add ons, they are the features that create a profitable store.
There is also documentary evidence. Standard work letters often state that the allowance may be applied to construction and finishing of the premises, including interior finishes and fixtures. That phrasing is common in retail leases and is consistent with guidance from BOMA on leasing and build out. Design trade organizations such as the Retail Design Institute showcase case studies where TI allocations funded millwork, lighting, and customer experience zones because those elements drive dwell time and sales conversion. When projects target energy performance, interior lighting retrofits tied to TI are recognized by the U.S. Department of Energy’s efficiency guidance, which further validates that interior design decisions are legitimate uses of TI funds.
Tenant improvement funds, often called TI allowances, are sums that a landlord contributes toward the cost of building out a leased space so the tenant can operate. For retail, TI is typically negotiated on a per square foot basis. It can be delivered as a lump sum reimbursement, a payment directly to the contractor, or as free rent that offsets capital the tenant invests. The mechanism matters less than the strategy. The goal is to use each TI dollar where it will have the most impact on customer experience, brand consistency, and lifetime operating costs.
A cold dark shell usually has structural floors, exterior walls, and roof, with minimal services inside the premises. A warm shell may include basic HVAC distribution, a restroom, ceilings, and lighting. In older urban buildings on the East Coast, a tenant may also inherit partial improvements from a prior user. Delivery condition determines how far your TI dollars must stretch. If you receive a cold shell on a corner in SoHo, more of the allowance will go to mechanical and life safety. If you receive a warm shell on the Magnificent Mile, more of the allowance can go to lighting, millwork, and finishes that customers see and touch.
Tip: Ask your broker for a clear schedule of landlord work versus tenant work, then confirm the list with your design team before you sign. The best practice is to align landlord work with base building tasks and to reserve TI for interior design outcomes that differentiate your store. This approach tracks with how BOMA positions work letters.
A strong lease is the first design decision. You are not just negotiating a number, you are negotiating what that number can buy.
New York often involves landmarked facades and tight back of house risers that constrain HVAC and electrical routes. Philadelphia has many historic shells where floor leveling and fire protection drive cost. Newark offers generous floor plates in converted loft buildings where column spacing is a key design variable. Chicago’s flagship corridors expect premium storefronts, which can become a landlord cost if framed correctly in the work letter. Your interior design team should translate these conditions into a negotiation strategy that preserves TI for high impact interiors.
Tenants sometimes accept a turnkey offer that applies TI only to generic systems. The result is a white box that still requires a second wave of spending to achieve a luxury experience. The better approach is to keep landlords focused on base building upgrades and to preserve TI for visible design features. This practice is consistent with how BOMA describes roles in work letters.
Signature fixtures are expensive. A single cash wrap with stone, curved glass, integrated lighting, and data can run into the tens of thousands. Fitting room suites with acoustic doors, mirrors, feature lighting, and premium finishes can add up quickly. Plan these items early, ask your designer for shop level pricing assumptions, and reserve TI dollars for them.
Cheaper lighting heads or vinyl flooring may save money on day one but can cost far more over five years. The U.S. Department of Energy and ENERGY STAR provide calculators that show lifetime utility and maintenance savings for efficient lighting and controls. Use those numbers to justify TI allocations toward better systems.
Drawings, engineering, and permits are required to unlock TI. Confirm that the allowance can be used for professional services. Ensure your design team scopes code research, ADA compliance, life safety, and landlord approvals. Doing this work first reduces change orders that burn through TI later.
The aim is to invest TI where customers will feel it and where the business will benefit from it over time. The following strategies reflect that goal.
Lighting is one of the highest return investments in retail interiors. Use the allowance for a three part scheme. Ambient lighting sets the overall brightness. Accent lighting highlights merchandise and focal moments. Task lighting supports fitting rooms and point of sale. Measure expected savings with DOE efficiency guidance, then present those savings during landlord negotiations to protect lighting dollars inside TI.
The first 15 feet inside the threshold influence how customers feel about the brand. Use TI for a generous portal, an entry vignette, and a brand wall that photographs well. When the landlord understands that these features increase rent worthiness and traffic, it becomes easier to direct allowance dollars to them.
Fitting rooms drive conversion in apparel and accessories. Allocate TI to acoustics, lighting, mirror placement, comfortable seating, and a cleanable yet warm palette. Strong fitting rooms are worth more than another run of shelving.
Select finishes that clean easily and wear well. Tile or poured flooring near entries, durable paint systems on walls, scuff resistant bases, and solid surface at touch points. These choices reduce lifetime cost and protect brand presentation. You can cite USGBC materials on durability within LEED O plus M when making the case for resilient specifications.
Use the allowance to purchase modular fixtures that can be reconfigured for seasonal campaigns or new product categories. Modularity reduces future capital spending and eliminates waste, which supports ESG goals familiar to many landlords. The Retail Design Institute highlights modularity as a hallmark of resilient store design.
Nothing hurts a luxury reveal like surface mounted conduit. Coordinate power, data, and sprinkler placement with your interior design drawings before any slab cuts or framing begin. The National Institute of Standards and Technology provides useful references for structured cabling and equipment rooms that you can adapt for retail.
Spend TI on base build interiors that last, then add seasonal layers with operating funds. The long lived layer includes floors, ceilings, lighting, and permanent millwork. The seasonal layer includes graphics, soft seating covers, and movable display kits. This two speed plan keeps the space fresh without asking the allowance to do everything at once.
ADA compliance is a requirement, and true inclusion is a competitive advantage. Use TI to create accessible circulation, seating areas, and fitting rooms. The ADA National Network provides practical design guidance that improves comfort and dignity for all customers.
Use TI to integrate power and data at the floor, to prewire for audio and video, and to create a flexible zone where you can host launches, panels, and creator collaborations. Event capability increases social reach and repeat visits, which in turn strengthens your negotiation position for future TI on additional locations.
Many utilities and municipalities offer rebates for efficient lighting and controls. Research these with your engineer, then assign rebates to the tenant side to stretch TI dollars further. The U.S. Department of Energy and local utility programs often publish up to date rebate catalogs.
A luxury cosmetics brand signed a lease in SoHo for a two level corner space with a partial warm shell. The landlord offered an allowance of 80 dollars per square foot. The interior design team conducted a pre lease assessment and found that the existing HVAC distribution was inadequate, and the electrical service was undersized for the planned media wall and lighting density.
The team used a negotiation plan that moved HVAC upgrades to landlord work, citing how base building systems are customarily handled in comparable buildings per BOMA work letter practices. They also showed a lighting energy model that used U.S. Department of Energy metrics to demonstrate lower utility costs and better color rendering for cosmetics. This supported a request to allow TI dollars for a layered lighting package and for the double height feature wall with integrated screens.
The final work letter delivered a landlord funded HVAC upgrade and service increase, while preserving the full allowance for interior design. TI covered an illuminated entry portal, a central consultation bar in stone and wood, a premium fitting room that doubled as a selfie space, and a flexible event zone with concealed floor boxes. The store opened with a strong social launch and exceeded sales projections in the first two quarters. The landlord later used this outcome as a case study for other tenants, which validated the idea that TI used for interior design can benefit both parties.
Even a generous allowance rarely covers everything. The most resilient retail programs layer capital sources in a coordinated way.
The interior design team should map which items each source can fund, then structure bids and invoices so that reimbursement is straightforward. Clear documentation keeps draws smooth and prevents delays that might stall finishes or fixtures near the end of the schedule.
Interior design is a business tool. Each TI decision should improve at least one of the following outcomes. Attraction, engagement, conversion, retention, or advocacy.
A customer journey map identifies the arrival moment, the first focal point, the meander path, the try or test zone, the decision point, and the exit. Once the map exists, you can point to each segment and assign specific TI funded features. If the entry wall is a storytelling canvas, budget for lighting and materials there. If fitting rooms are the decision point, budget for acoustics, mirrors, and hospitality level finishes. If advocacy happens through social sharing, budget for photogenic materiality and clean ceiling views that look great on camera.
The design community consistently links lighting quality and material warmth to dwell time and willingness to explore. The Retail Design Institute publishes case studies that illustrate these patterns. The U.S. Department of Energy provides technical evidence that supports lighting quality and efficiency claims. Cite both the creative and the technical sources, then direct TI accordingly.
Retail programs evolve quickly. Tenants that design for change get more value from each allowance.
Sustainability is not a separate agenda. It is an operating strategy that saves money, reduces risk, and aligns with consumer expectations.
A high performing TI plan is a team sport. Clarity of roles prevents budget bleed.
This alignment is easier when everyone shares the same objectives and when facts, not assumptions, drive decisions. The best practice is to open the work letter, the schedule, and the cost plan in the same meeting at least twice before construction starts. That creates a straight line from allowance to outcomes.
Historic shells, premium expectations, and strict approvals. Use TI to elevate lighting and interior finishes while the landlord funds service upgrades and facade work. Support your positions with BOMA work letter guidance and with DOE lighting performance data.
Large floor plates and attractive rents in converted buildings. Use TI for modular fixtures and event capable zones that help anchor growing districts. Point to design resiliency examples from the Retail Design Institute.
Rich historic stock and neighborhood main streets. Use TI to balance preservation and performance. If incentives apply, connect with the National Trust for Historic Preservation to support adaptive reuse choices.
Flagship corridors that reward impact. Use TI for dramatic arrival sequences and layered lighting, then show the operating savings that flow from efficient systems with DOE resources.
Tenant improvement funds are more than a number in a lease. They are the first and most consequential interior design decision you will make for a retail space. When TI is aligned with customer journey, brand expression, energy performance, and operational resilience, your store opens stronger and performs better for longer. When TI is consumed by generic upgrades, you often face a second round of capital spending to achieve the interior you needed in the first place.
The most reliable way to keep TI focused on outcomes is to involve your design partner at the very beginning. If you want a team that treats allowance strategy as part of the creative process, partner with an interior design firm specializing in luxury retail. That collaboration gives you a sharper negotiation plan, a clearer scope, and a build sequence that protects the elements customers actually notice.
The market data from the International Council of Shopping Centers, the work letter practices framed by the Building Owners and Managers Association International, the energy performance evidence from the U.S. Department of Energy and ENERGY STAR, and the case studies highlighted by the Retail Design Institute and the U.S. Green Building Council all point in the same direction. Interior design is not a cosmetic afterthought. It is the value engine that converts a shell into a destination. When your TI dollars serve that engine, your flagship does more than open on time. It opens with a story that customers can see, feel, share, and return to.
HHDESIGNERS is an international commercial interior design agency creating spaces that elevate the way people live, work and make their mark on the world.
