Should you push harder for TI allowance or free rent on a Denver office lease?
It depends on what the deal needs to do for you. Tenant improvement (TI) allowance funds your build-out, capital you would otherwise spend out of pocket, so push harder on TI when you're constructing space. Free rent (abatement) improves near-term cash flow and lowers your net effective rent, so push harder on free rent when you're taking pre-built or as-is space. Both are concessions, but they hit your budget, your landlord's basis, and your effective rate in different ways. In Denver's 2026 office market, with downtown vacancy near 39%, you can often win both. The question is which one to spend your leverage on first.
Two occupiers sign at the same building, same face rate, same week. One walks away with a fully funded build-out. The other walks away with a year of free rent. Both think they negotiated well. Only one of them got the right concession for their situation.
That's the trap with TI allowance and free rent. They feel interchangeable. They're both landlord money, both improve your deal, both show up in the concession package. But they do different jobs, and treating them as one pool of "stuff to ask for" is how you end up with a build-out you didn't need and a cash crunch you didn't see coming.
Here's how to decide which one to push harder for.
What each concession actually does
Strip away the jargon and these two concessions solve two different problems.
TI allowance is the dollars the landlord contributes to building out your space. New walls, electrical, HVAC distribution, flooring, finishes. It's quoted per square foot or as a lump sum, and in Denver right now it ranges from roughly 25% to 150% of one year's base rent. For strong credit on a longer term, fully funded build-outs are achievable. TI replaces capital you'd otherwise pull from your own balance sheet.
Free rent (abatement) is months where you occupy the space and pay no base rent. The Denver baseline is roughly one month free per year of term, so a seven-year downtown deal can carry 6 to 12 months of abatement. Free rent doesn't build anything. It improves your cash flow in the early period and lowers what you pay across the term.
The simplest way to hold the distinction: TI is money you don't spend. Free rent is money you don't pay. One offsets capital expense. The other offsets occupancy cost.
How each one flows into net effective rent
Both concessions reduce your net effective rent, the number that actually matters once you spread every incentive across the full term. (If the gap between face rent and net effective rent is new to you, it's the whole negotiation, and most tenants miss it.)
The mechanics differ in a way that changes your strategy:
- Free rent flows in cleanly. Every abated dollar is a dollar off your total rent obligation. Twelve months free on a $34 deal is twelve months of $34 you simply don't pay. It hits net effective rent directly and predictably.
- TI only flows in to the extent it replaces your own spend. If the landlord funds $80 per square foot of build-out and you would have spent $80 anyway, that's $80 of capital you keep. But if they fund $80 and you only needed $40 of work, the extra $40 doesn't help your operating budget the way free rent would. It built something you didn't require.
That asymmetry is the core of the decision. Free rent is fungible, it improves any deal. TI is only worth its face value if you actually need the build-out it pays for.
In Denver's current market, the combined effect of both concessions is large. Net effective rent is running 25% to 35% below face across much of the metro. The question isn't whether you'll get concessions. It's which mix gets you there most efficiently.
How your landlord values each (and why it matters to you)
You negotiate better when you understand what each concession costs the other side. Landlords don't treat TI and free rent the same, and that shapes where they'll give.
TI is amortized into the landlord's basis. They fund the build-out, then recover it over your lease term through the rent. That's why TI is tightly tied to your credit and your term length. A landlord will fund a generous build-out for a creditworthy tenant on a ten-year deal because they have time and a reliable counterparty to amortize against. Ask for the same TI on a three-year term with thin credit and you'll hit a wall. The math doesn't work for them.
Free rent hits their near-term cash but preserves face rent. Abatement costs the landlord real money in the early months, when they're covering operating expenses with no base rent coming in. But it leaves the headline rate intact, which protects the building's appraised value and its standing with lenders. That's why landlords in this market lean on free rent and TI to win deals rather than cutting the quoted rate. They'll defend the face number and bury the discount in concessions.
The practical takeaway: TI is easier to win with strong credit and a long term. Free rent is easier to win when the landlord wants to protect face rent and has the near-term cash to absorb the gap. Knowing which lever your specific landlord can pull is half the negotiation.
A simple framework for which to push harder
Run your situation through these four questions. They'll tell you where to concentrate your leverage.
- Do you need to build out? If you're taking raw or heavily reconfigured space, favor TI. The build-out is happening either way, so every TI dollar is a dollar off your capital budget. If you're taking pre-built, second-generation, or as-is space that already works, favor free rent. You don't need construction money. You need cash flow.
- What's your capital budget? If capital is tight and you'd struggle to fund a build-out from your own balance sheet, TI is doing critical work, push for it hard. If capital isn't the constraint and you're optimizing total occupancy cost, free rent usually delivers cleaner value.
- How long is the term? Longer terms unlock more TI because the landlord has more years to amortize it. On a short term, TI is harder to win and free rent often becomes the more realistic lever.
- How does this landlord value each? A landlord protecting face rent for an appraisal will trade free rent more readily. A landlord with strong credit appetite and a long-term horizon will fund TI. Match your ask to what they can actually give.
The honest answer for most occupiers: you push for both, but you lead with the one your situation demands and treat the other as the trade. If you need the build-out, anchor on TI and use free rent as the give-and-take. If the space already works, anchor on free rent and don't burn leverage chasing build-out money you won't use.
One more thing that sits underneath all of this. The lease structure, whether it's full service gross or NNN, changes how these concessions land, because it changes what's already baked into your rate and what you carry separately. Negotiate the concessions without understanding the structure beneath them and you can misjudge the real value of the deal.
Frequently asked questions
What is the difference between TI allowance and free rent on an office lease?
TI allowance is money the landlord contributes toward building out your space, offsetting capital you'd otherwise spend. Free rent is a period of occupancy with no base rent, which improves your cash flow and lowers your net effective rent. TI is money you don't spend on construction. Free rent is money you don't pay in rent.
Should I negotiate harder for TI or free rent in Denver right now?
If you're building out the space, push harder for TI, because the build-out is a cost you'll incur regardless and every TI dollar offsets it. If you're taking pre-built or as-is space, push harder for free rent, because you don't need construction money and abatement improves your cash flow directly. Term length, credit, and your capital budget all factor in, so the right mix is deal-specific.
How much TI allowance can I get on a Denver office lease in 2026?
TI allowances generally range from about 25% to 150% of one year's base rent. For creditworthy tenants on longer terms in Denver's high-vacancy downtown, fully funded build-outs are achievable. The figure is tied to your credit and term because the landlord amortizes the TI over the life of the lease.
Does TI allowance or free rent lower my net effective rent more?
Free rent flows into net effective rent cleanly, since every abated dollar is a dollar you don't pay. TI only lowers your effective cost to the extent it replaces build-out spend you'd have incurred anyway. If a landlord funds more build-out than you actually need, the excess doesn't help your operating budget the way free rent would. In Denver, the combined concession package is currently running net effective rent 25% to 35% below face.
Why do Denver landlords offer concessions instead of just cutting the rent?
Because the face rate drives the building's appraised value and its standing with lenders. Landlords protect the headline number and bury the discount in concessions like TI and free rent. Free rent costs them near-term cash but preserves face rent, and TI gets amortized into their basis over your term, so both let them win your deal without marking down the asset.
The bottom line
TI allowance and free rent are both concessions, but they aren't interchangeable. TI funds your build-out and offsets capital. Free rent improves cash flow and cleanly lowers your net effective rent. Push harder for TI when you're constructing space, capital is tight, and your term is long enough for the landlord to amortize it. Push harder for free rent when you're taking space that already works and you're optimizing total occupancy cost. In Denver's 2026 market, with vacancy near 39% downtown and net effective rent running 25% to 35% below face, you can often win both. The skill is leading with the right one and trading the other.
This is the analysis I run with every occupier before we sign anything: what does the space actually need, what's your capital position, and which concession does the most work for your situation. Concession structures and lease economics shift quarter to quarter, so confirm any structure against your own counsel and CFO before you commit.
If you're working through a lease decision in Denver, whether that's a renewal, a relocation, or a footprint question your CFO is pushing on, I'm happy to run the numbers with you. Schedule a conversation at calendly.com/mccririe.
About Brian McCririe
Brian McCririe is Executive Managing Director of SVN | Denver Commercial and National Council Chair for Occupier Services across the SVN network. After 25 years representing tenants and investors across global markets, he now focuses on the Denver Metro area helping companies navigate leases, acquisitions, and the gap between what landlords offer and what occupiers deserve. He leads one of the metro's top tenant rep practices and writes about the deals, decisions, and market shifts that matter to corporate real estate leaders.
