{
  "slug": "ti-lc-amortization",
  "title": "TI/LC Amortization Calculator",
  "heading": "Tenant Improvement & Leasing Commission Amortization Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/ti-lc-amortization",
  "summary": "Amortize TI allowances and leasing commissions to find true effective rent.",
  "description": "Tenant improvement (TI) allowances and leasing commissions (LC) are real cash costs landlords pay to sign a lease, and lumping them into a simple cap rate or NOI calculation without amortizing them properly overstates a deal's true economics. This calculator spreads TI and LC costs evenly across the lease term to compute an amortized annual cost, then nets that against contractual base rent to show effective rent — the number that actually reflects what you're netting after landlord-side leasing costs. It also shows the total capital outlay upfront, since even though it's amortized for analysis purposes, the cash goes out at lease signing or tenant move-in, which matters for a landlord's short-term liquidity and financing needs. Comparing two competing lease proposals on face rent alone is a common mistake — a $28/sqft deal with a $10/sqft TI allowance and 6% commission is often worse than a $26/sqft deal with a $4/sqft allowance and the same commission, and this calculator makes that comparison explicit rather than leaving it to gut feel.",
  "formula": "Total TI/LC cost = (TI $/sqft × sqft) + (Base rent × lease term × commission%); Amortized annual cost = Total TI/LC cost ÷ lease term years; Effective annual rent = Annual base rent − amortized annual cost.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=ti-lc-amortization",
  "inputs": [
    {
      "id": "sqft",
      "label": "Leased square footage",
      "kind": "number",
      "hint": null,
      "default": 5000,
      "unit": "sqft",
      "min": 1,
      "max": null
    },
    {
      "id": "baseRentPsf",
      "label": "Base rent per sqft per year",
      "kind": "number",
      "hint": null,
      "default": 26,
      "unit": "$/sqft",
      "min": 1,
      "max": null
    },
    {
      "id": "tiPsf",
      "label": "TI allowance per sqft",
      "kind": "number",
      "hint": null,
      "default": 15,
      "unit": "$/sqft",
      "min": 0,
      "max": null
    },
    {
      "id": "leaseTermYears",
      "label": "Lease term",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": "years",
      "min": 1,
      "max": 20
    },
    {
      "id": "commissionPct",
      "label": "Leasing commission (% of total lease value)",
      "kind": "number",
      "hint": null,
      "default": 5,
      "unit": "%",
      "min": 0,
      "max": 10
    }
  ],
  "outputs": [
    {
      "id": "effectiveRentPsf",
      "label": "Effective rent per sqft (net of TI/LC)",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "effectiveAnnualRent",
      "label": "Effective annual rent",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "totalLeasingCost",
      "label": "Total TI + commission cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "amortizedAnnualCost",
      "label": "Amortized annual TI/LC cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "annualBaseRent",
      "label": "Gross annual base rent",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Leased square footage: 5000 sqft",
      "Base rent per sqft per year: 26 $/sqft",
      "TI allowance per sqft: 15 $/sqft",
      "Lease term: 7 years",
      "Leasing commission (% of total lease value): 5 %"
    ],
    "outputs": [
      "Effective rent per sqft (net of TI/LC): $22.56",
      "Effective annual rent: $112,786",
      "Total TI + commission cost: $120,500",
      "Amortized annual TI/LC cost: $17,214",
      "Gross annual base rent: $130,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter leased square footage (sqft).",
      "Enter base rent per sqft per year ($/sqft).",
      "Enter ti allowance per sqft ($/sqft).",
      "Enter lease term (years).",
      "Enter leasing commission (% of total lease value) (%).",
      "Read your effective rent per sqft (net of ti/lc) on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "sqft": 3000,
        "baseRentPsf": 15.6,
        "tiPsf": 9,
        "leaseTermYears": 4,
        "commissionPct": 3
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "sqft": 5000,
        "baseRentPsf": 26,
        "tiPsf": 15,
        "leaseTermYears": 7,
        "commissionPct": 5
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "sqft": 8000,
        "baseRentPsf": 41.6,
        "tiPsf": 24,
        "leaseTermYears": 11,
        "commissionPct": 8
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Should TI/LC amortization include interest?",
      "a": "Some landlords amortize TI at an implied interest rate (essentially treating it as a loan to the tenant embedded in rent) rather than straight-line, which produces a higher effective annual cost early in the term. This calculator uses straight-line for simplicity; for precise underwriting, model it as a loan amortization if your lease structure charges the tenant back through rent with interest."
    },
    {
      "q": "Why do TI allowances vary so much between deals?",
      "a": "Tenant improvement need depends heavily on space condition (vanilla shell vs. second-generation space with existing improvements), tenant type (medical and restaurant buildouts run far higher per square foot than general office), and market leverage — a strong tenant in a soft leasing market can negotiate a much bigger allowance."
    },
    {
      "q": "How does this affect my cap rate underwriting?",
      "a": "Use effective rent, not face rent, when calculating in-place or projected NOI for a property with significant upcoming lease-up or renewal activity requiring TI/LC spend. Underwriting off face rent without netting these costs is one of the most common ways buyers overpay for value-add office and retail deals."
    },
    {
      "q": "Do renewal leases usually cost less in TI/LC than new leases?",
      "a": "Yes, generally — renewals typically require far less TI (the tenant's space is already built out) and lower or no leasing commission in many markets, which is why retention-focused asset management (competitive renewal terms offered early) often beats chasing a slightly higher face rent from a new tenant that requires a full re-tenanting cost."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/commercial-nnn-lease-escalations",
    "https://www.revenuelab.fyi/toolbox/cap-rate-expansion-sensitivity",
    "https://www.revenuelab.fyi/toolbox/equity-multiple-vs-irr"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — TI/LC Amortization Calculator (https://www.revenuelab.fyi/toolbox/ti-lc-amortization)"
}