Tenant improvement allowances (TIAs) rose significantly in the post-COVID period, reaching a cyclical peak in late 2024. This surge was largely driven by a tenant-favorable market in which landlords competed aggressively to fill space amid weakened overall demand and strong tenant demand for high-quality buildouts. However, despite generous concession packages, TIAs have not kept pace with surging construction costs stemming from inflation in materials and labor. While the imbalance between TIAs and actual buildout costs is not new, the gap is now wider than ever.
The immediate post-pandemic period was marked by tepid office leasing demand and tenant reluctance to make long-term commitments. This was a primary factor pushing landlords to offer larger TIAs to attract tenants and support necessary buildouts, while requiring longer lease terms to offset costs. However, by the end of 2024, the market dynamics began to shift. With newly built, quality space becoming scarcer and early signs of a rebound in office demand, landlords have appeared to regain some leverage in lease negotiations.
This raises a key question for the remainder of 2025 and 2026: will TIAs stabilize—or even decline—as landlords push back? Or will external pressures, such as rising tariffs on construction materials, drive costs even higher and keep TIA levels elevated? As we enter a new phase of the office market cycle, competing forces are shaping what comes next.
Key takeaways
#01 Tenant improvement allowances.
TIAs peaked following a post-COVID rebound and have recently begun to stabilize at historically high levels.
#02 Tariffs & construction costs.
New tariffs are already pushing construction costs higher, and continued pressure may further widen the gap between TIAs and actual buildout expenses.
#03 New supply.
A slowdown in office development is intensifying competition for high-quality space and could reshape TIA strategies, with landlords of trophy assets gaining leverage while older buildings may need higher TIAs to stay competitive.
#04 Leasing activity & relocations.
Recent leasing volumes are up, particularly in top-tier assets, indicating early recovery momentum in the office market. New uncertainty could reverse this course, though recent trends show tenants are still willing to relocate vs. remain in place.
#05 Debt distress.
CMBS office distress has hit its highest point since 2012 and could limit landlords’ ability to sustain high TIAs moving forward.
#06 Length of lease commitments.
Post-2020, higher TIAs have become more strongly tied to longer lease terms, reinforcing landlord-tenant trade-offs and tenants’ willingness to commit in exchange for greater buildout support.
Looking ahead
As construction costs remain volatile, debt burdens grow, and tenant preferences shift, the future of TIAs will be shaped by a bifurcated market—where well-capitalized landlords with high-quality assets can continue offering strong incentives, while others face mounting challenges. This divergence may lead to higher costs and greater uncertainty for tenants, particularly in lower-tier buildings.
Office TIAs at peak, though growth has eased
According to CompStak’s lease data, TIAs (weighted by transaction size) have increased 112.0% from 2016 through 2025 year to date, peaking this year. Year-over-year growth has remained positive but has slowed for four consecutive years. The only decline occurred in 2020, reflecting the disruption from the COVID-19 pandemic. In 2021 and 2022, TIAs rebounded sharply with two years of double-digit gains. By contrast, 2023 through 2025 show a decelerating pace of growth, though current levels remain at cyclical highs and well above pre-pandemic norms.