Why this matters
Build-out is usually the biggest cost between signing a lease and opening the doors, and the easiest to underestimate. If you sign first and price the work later, you lose all leverage on the tenant improvement (TI) allowance, and every surprise behind the walls comes straight out of your runway.
What "done" looks like
- A licensed contractor has walked the actual space with you, before signing
- You hold a written line-item estimate (HVAC, electrical, plumbing, ADA, finishes)
- A 15–20% contingency sits on top of the estimate
- The total feeds directly into your LOI ask for TI allowance and free rent
How to do it
- Shortlist 2–3 contractors with experience in your use type — restaurant, retail, and office build-outs price very differently.
- Walk the space together and ask about HVAC capacity, electrical panel size, plumbing runs, and venting or grease-trap needs.
- Request line-item estimates, not one lump sum, so you can cut scope later.
- Add a 15–20% contingency — older buildings hide problems in walls and floors.
- Carry the number into the LOI (next step) as your TI-allowance and free-rent ask.
Common mistakes
- Budgeting from an internet per-square-foot average instead of a walk-through of your space
- Forgetting soft costs: permits, drawings, utility upgrades, deposits
- Trusting the landlord's "vanilla shell" description instead of your own inspection
Real-world examples
- Restaurant build-outs are widely documented in the $150–$500+ per square foot range depending on kitchen scope — far above a simple office refresh.
- Industry guides show TI allowances varying by an order of magnitude between basic office space and restaurant conversions — which is why you price before you negotiate.
From a founder's point of view
The estimate is really about leverage. A founder holding a contractor's line-item bid can negotiate TI allowance and free rent from facts; a founder who guessed finds out mid-build that the runway is gone.
Rule of thumb
No contractor walk-through, no signature — and a budget without a 15–20% contingency is not a budget.