Houston Office Buildout Budget: A Worked Example With TI Allowance
An office buildout budget needs to answer two questions: what will it take to open the space, and how much cash must the tenant provide? The contractor’s price answers only part of the first question. A landlord’s tenant improvement allowance answers only part of the second.
Start with the commercial buildout cost calculator to explore your assumptions. Then separate the construction scope, owner costs and funding terms as shown below.
A 2,000-square-foot office budget example
Consider a hypothetical 2,000-square-foot leased office suite. The tenant wants enclosed offices, a meeting room, an open work area and a small break area.
Every amount below is an invented teaching assumption. This is not an Epex quote, a completed-project budget or a Houston market-rate estimate. The example assumes the building can support the proposed use without major utility, structural or base-building upgrades. Actual scope and pricing need project-specific review.
| Budget item | Assumed amount | What to confirm |
|---|---|---|
| Contractor construction scope | $160,000 | Demolition, partitions, finishes and agreed building-system work; identify exclusions |
| Design and engineering | $16,000 | Required drawings, consultant scope and revisions |
| Permits and associated fees | $4,000 | Actual jurisdiction, scope and applicable charges |
| Furniture, IT and move-in | $20,000 | Items bought separately by the tenant |
| Owner contingency | $16,000 | A reserve for uncertainty, separate from committed scope |
| Total planning budget | $216,000 | All five categories included once |
The assumed construction amount is $80 per square foot: $160,000 divided by 2,000. The total planning budget is $108 per square foot: $216,000 divided by 2,000. Neither figure is a local benchmark; both are outputs from these invented inputs.
This is why two apparently different cost-per-square-foot figures can describe the same project. One counts the contractor’s work. The other includes the tenant’s wider opening budget. Ask what is included before comparing either figure with a proposal.
For the broader categories, see our commercial construction cost breakdown.
Apply the landlord’s TI allowance
Now assume the signed work letter provides a $30-per-square-foot allowance on the same 2,000 square feet, and that enough of the example’s costs qualify to use all of it.
| Funding calculation | Amount |
|---|---|
| Total planning budget | $216,000 |
| Assumed landlord contribution: 2,000 × $30 | −$60,000 |
| Tenant’s net funding requirement | $156,000 |
The allowance reduces the assumed tenant-funded amount. It does not reduce the scope’s cost. Before relying on that contribution, confirm the lease and work letter: eligible expenses, allowance area, reimbursement conditions, documentation, deadlines and responsibility for overruns. Have your broker or attorney review the actual lease terms.
Do not subtract the same allowance twice. If a proposal already shows a landlord credit, reconcile that treatment with your owner budget before taking another deduction.
Net cost and peak cash need are different
Assume, for this example only, that the landlord reimburses the $60,000 after the tenant has paid the eligible costs and supplied the required closeout documents. Without another funding source or staged reimbursement, the tenant may need to fund the full $216,000 before receiving that contribution. Its net assumed cost remains $156,000 after reimbursement.
Your payment calendar should therefore show when deposits, progress payments, separate purchases and reimbursements occur. An allowance amount without its payment conditions is an incomplete cash plan.
Test the budget before committing to the space
Use the example as a reconciliation method, not as a price list. Ask the project team to resolve these questions against the actual suite:
- What is the landlord delivering, and which existing systems can the proposed layout use?
- Which partitions, ceilings, finishes and building systems are included in the construction scope?
- What sits outside the contractor’s proposal, including furniture, technology and owner-furnished equipment?
- Which approvals and design documents does the scope require?
- When must each party pay, and what must happen before the landlord releases its allowance?
If construction in this example increases by $20,000 and every other assumption stays fixed, the total becomes $236,000 and the net tenant funding requirement becomes $176,000. Keeping the reserve fixed is a simplifying assumption; a real scope change should also prompt a review of design, fees, schedule and contingency.
Put the permit path beside the budget
For a Houston office, confirm the permitting jurisdiction and scope before assigning an opening date. The City of Houston’s Buildout Permit listing concerns the build-out of existing empty commercial space and requires plan review and inspections. It is not a substitute for checking whether that permit category fits your project.
Our Houston commercial permits guide explains how to organize the responsibilities and milestones. Keep those milestones next to your payment calendar so a revised opening date also triggers a cash-flow review.
Questions owners ask
Does this example show what my office should cost?
No. The amounts demonstrate how to organize a budget and reconcile an allowance. They do not price your suite. Plans, site conditions, selections and trade proposals are needed to develop your project budget.
Can I use the entire TI allowance on any expense?
Check your work letter. This example assumes the full contribution is available against qualifying expenses; it does not establish which of your expenses qualify.
Should I use construction cost or total project cost when comparing spaces?
Use the same complete categories for each space, then compare funding timing as well as net cost. A lower contractor price can coexist with higher separate costs or a larger cash requirement before reimbursement.
Review the space before relying on the number
Use the buildout calculator to explore scenarios, then bring the suite information, intended layout, landlord work letter and available plans to Epex Construction. We can discuss the commercial buildout scope and what is needed to move toward a defined proposal.