Retail Build-Out Costs: What to Budget From LOI to Grand Opening

A retail build-out runs about $75 to $300 per square foot for soft-goods stores and $200 to $555 all-in for restaurants, depending on concept, market, and finish. Your real budget is that construction number plus soft costs, FF&E, and contingency, minus the landlord's tenant improvement allowance. Build the whole number before the LOI, not after.

The lease rate gets all the attention because it shows up every month for ten years. But the build-out is the largest single check you write between signing and opening, and it is the one most likely to blow your model. The mistake operators make is treating it as a post-signing problem when it belongs in the site decision. This guide breaks down what a build-out actually costs by concept, where the hidden line items hide, how the timeline stretches, and how to budget the whole project cost before you commit to a site.

What a retail build-out costs by concept

Build-out cost per square foot swings widely by concept because the work is different. A soft-goods store needs floors, lighting, fitting rooms, and a counter. A restaurant needs a commercial kitchen, grease management, and far more plumbing and electrical. The national average for an in-line retail fit-out reached roughly $155 per square foot in 2025, up about 4 percent year over year (Cushman & Wakefield, 2025).

Here are the working ranges by concept, separating construction-only figures from all-in project costs where the sources allow:

Two things move these numbers more than anything else: geography and shell condition. The same store costs roughly $117 per square foot to build in the Southeast and $211 in Northern California (Cushman & Wakefield, 2025). And renovating a second-generation space, one that already has a kitchen or a usable layout, runs 30 to 50 percent less than building out a cold shell (EB3 Construction, 2025). When you compare two sites, the cheaper rent on a raw shell can lose to the pricier second-gen space once the build-out is in the model.

Hard costs versus soft costs

Hard costs are the physical construction, and they run about 70 to 80 percent of the total project budget. Soft costs are everything that supports the build without building it, and they add another 20 to 30 percent. Operators who budget only the hard number are short by a fifth before they break ground.

Hard costs cover materials and site labor: mechanical systems, electrical, carpentry, storefronts, finishes, and ceilings. On a national-average retail build, mechanical alone runs about $28 per square foot and carpentry and storefronts about $22 per square foot (EB3 Construction, 2025).

Soft costs are the quieter line items:

• Architecture and engineering: 8 to 15 percent of total project cost (industry standard, 2025)
• Permit and regulatory fees: 3 to 5 percent of project cost in many jurisdictions
• Project management: typically 3 to 5 percent of hard costs through construction
• Insurance, financing carry, legal, and signage: the remainder

For restaurants, soft costs land at 12 to 20 percent of hard construction cost because of the added engineering and health-department review (Timeless Construction, 2026). Terrapin Construction Group puts second-generation retail soft costs at 8 to 15 percent of hard costs, plus a 5 to 10 percent contingency on top (Terrapin CG, 2026).

FF&E: the line that surprises restaurant operators

FF&E, short for furniture, fixtures, and equipment, is the budget line that catches first-time restaurant operators off guard. It runs 30 to 40 percent of a total restaurant build-out, and on high-equipment concepts it can reach higher still (EB3 Construction, 2025). On a 4,000 square foot restaurant, FF&E alone runs $160,000 to $480,000 (Timeless Construction, 2026).

The kitchen drives it. A basic quick-service kitchen package, with fryers, flat-tops, and a single hood, starts around $75,000. A full-service kitchen runs $200,000 to $500,000 or more (Timeless Construction, 2025-2026). These also carry long lead times, which is a timeline problem as much as a budget one, covered below.

Soft-goods retail is the opposite case. FF&E there is fixtures, shelving, display cases, signage, and lighting, a much smaller share of the total. The lesson holds either way: pull FF&E out as its own line. Folding it into "construction" is how the number gets missed.

What the TI allowance covers, and the gap you fund

The tenant improvement allowance is the dollar amount a landlord contributes toward your build-out. It almost never covers the whole thing. Most retail space comes with a $15 to $60 per square foot allowance, while first-generation construction runs $90 to $180 per square foot (Terrapin CG, 2026). The difference is your cost to fund out of capital or to amortize back into rent.

That gap is a negotiation, not a fixed number, and it sits on top of the lease-structure conversation. If your deal is triple net, the tenant improvement allowance is one of several levers you trade against base rent, free rent, and term at the same table. Lock the delivery condition and the allowance into the letter of intent before you sign, because that is when you have the most negotiating room to move it.

Whatever the landlord covers, the amortized gap becomes part of your monthly occupancy cost. A useful test: total occupancy cost, meaning rent plus CAM plus the amortized TI gap, should land at 8 to 12 percent of projected annual sales for retail, 6 to 10 percent for full-service restaurants, and 5 to 8 percent for quick-service (Terrapin CG, 2026). If the build-out gap pushes you past that band, the deal stops penciling no matter how good the rent looked.

The hidden costs that blow budgets

Most blown build-out budgets are not blown by the headline construction number. They are blown by the line items that never made it into the first estimate. Three categories do the damage: contingency that was treated as optional, code-driven work that surfaces mid-construction, and permit and impact fees that scale with project value.

Start with contingency. Tenant improvement projects routinely run 15 to 25 percent over the initial budget because of unforeseen conditions: failed plumbing, asbestos, structural surprises, and code-compliance upgrades (industry GC data, 2025-2026). Budget a 10 to 20 percent contingency and treat it as committed. On a $300,000 estimate, that means carrying $330,000 to $360,000.

Then the concept-specific surprises. Restaurants trigger A-2 occupancy review, which pulls in the health department and the fire marshal, and they carry build items that never show up on a standard permit estimate: grease interceptors at $15,000 to $80,000 and sprinkler modifications at $4 to $12 per square foot of affected area (Terrapin CG, 2026).

Permit and impact fees are the last line. Most jurisdictions charge 1 to 2 percent of total construction value, so a $1 million build generates roughly $10,000 to $15,000 in permit fees, with additional layers for fire review, accessibility, and traffic impact (ConstructionBids.ai, 2026). None of it is large on its own. Together it is the difference between a budget that holds and one that doesn't.

Construction costs are still climbing

Budget with current numbers, not a quote from a build you did three years ago. Commercial construction costs have kept rising every quarter. The Turner Building Cost Index closed Q4 2025 up 4.72 percent year over year, with quarterly increases through 2025 (Turner Construction, 2025). Restaurant build-out costs specifically have escalated 40 to 60 percent since 2020 (KRG Hospitality, 2025).

Materials remain volatile underneath that average. As of mid-2025, semiprocessed aluminum was up 17 percent year over year and copper up about 9.5 percent, while some steel categories softened (Cumming Group, 2025). For a build with significant electrical and HVAC scope, those swings move the number. The practical takeaway is to refresh per-square-foot assumptions every time you underwrite a new site, and to ask your general contractor what they are pre-pricing for commodity increases before they hand you a bid.

The timeline from LOI to grand opening

Plan for four to twelve months from lease signing to doors open, driven mostly by permitting and concept complexity. The construction itself is rarely the long pole. Design, approvals, and the permit queue are.

Source: Terrapin Construction Group and EB3 Construction, 2025-2026.

Permitting is where the spread lives. Suburban Texas and Florida can clear a commercial permit in 3 to 8 weeks; coastal California, New York City, and DC routinely run 9 to 18 months (Terrapin CG, 2026). Each plan-check correction cycle adds another 2 to 6 weeks, and restaurants draw extra specialty-agency review. A pre-application meeting with senior building-department staff is one of the few ways to compress the front of the schedule in a high-volume jurisdiction.

The other timeline trap is long-lead equipment. Commercial kitchen equipment carries 8 to 16 week lead times and has to be ordered during design, not after the space is framed, or it delays your opening even after you pass inspection (EB3 Construction, 2025). When you set a grand opening date, count back from the equipment lead time, not just the construction schedule.

How to budget total project cost before you sign

Build the whole number before the LOI, not after. Total project cost is construction plus soft costs plus FF&E plus contingency, less the TI allowance. For a quick sanity check, soft-goods retail pencils around $75 to $200 per square foot all-in, quick-service restaurants at $200 to $480 per square foot of construction before FF&E, and full-service restaurants up to $555 per square foot all-in (Cushman & Wakefield, Terrapin CG, and KRG Hospitality, 2025-2026).

Then pressure-test it against revenue. The occupancy-cost band above is the first filter. Restaurants have a second rule of thumb: expected first-year sales should be at least $1.50 for every $1.00 of total startup cost, so a $500,000 all-in build needs to project $750,000 or more in year-one sales to be worth doing (Kallas Restaurant Accounting, 2024-2025). If a site can't clear that, the cheaper rent down the street is the better deal.

This is the part operators skip, and it is the part that decides whether a location performs. The build-out number belongs in the rent-per-square-foot comparison and the lease negotiation from the start, alongside the recurring CAM charges you'll carry after opening. When the full project cost is in the model before you sign, the LOI becomes a decision you can defend instead of a commitment you hope works out.

Operators who scale without surprises set the cost and revenue model before each site is committed, not after. TNT Fireworks opened 153 locations in six months, all of them on budget. At GrowthFactor we built the site and deal tooling around that order of operations: forecast the trade area and revenue for a site, keep its deal economics in one place, and put the full project cost next to projected sales before it goes to committee. The build-out is too large to discover after the ink dries.