what is leasehold improvements

Leasehold improvements are changes made to a rented space to fit a tenant’s needs, like adding walls, flooring, lighting, or built-in fixtures. They are usually paid for by the tenant or landlord as part of a lease deal, and they often stay with the property when the lease ends.

Quick Scoop

In simple terms, leasehold improvements are custom upgrades to leased property that make the space more useful for a business. They are typically permanent or semi-permanent changes, not ordinary repairs or movable furniture.

Common examples

• Interior walls or partitions.
• New flooring or carpeting.
• Lighting fixtures.
• Built-in cabinetry.
• Plumbing or electrical upgrades tied to the space.

What they are not

• Routine repairs or maintenance.
• Exterior building changes.
• Common-area improvements that benefit multiple tenants.
• Moveable items a tenant can easily take with them.

How they work

A tenant may request the changes, or a landlord may offer them to attract or keep tenants. These improvements usually become part of the property, and at the end of the lease they generally revert to the landlord unless the lease says otherwise.

Accounting note

From an accounting perspective, leasehold improvements are usually capitalized and then depreciated or amortized over the shorter of the lease term or the asset’s useful life.

If you want, I can also give you a one-line definition , a real-world example , or a simple accounting explanation.