Why is this such a common gap?

Because both policies are written around ownership and the fit-out has ambiguous ownership. The landlord insures "the building", which they read as what they built. The tenant insures "business personal property", which they read as movable things. A $400,000 restaurant fit-out is neither — it is fixed to a building somebody else owns — so unless someone has scheduled it, both insurers can reasonably say it is not theirs. It usually surfaces at a claim rather than at renewal.

The lease says improvements become the landlord’s property. What then?

Then the landlord generally has the insurable interest and should be scheduling them on the building limit — which also means the building limit needs increasing to include them, or you have created a coinsurance shortfall while solving a coverage gap. The tenant may still want cover for the use they lose. Where improvements only pass to the landlord at the END of the term, the answer changes during the lease, which is exactly the ambiguity to resolve in writing.

Does this affect the building limit?

Yes, and it is regularly missed. If the lease makes the improvements yours as landlord, the replacement cost of the building now includes them and the limit should reflect that. A building insured at shell value with three heavily fitted-out tenancies inside it is underinsured, and the coinsurance clause will find that out on a partial loss.

Who insures tenant improvements — the landlord or the tenant?

Whoever the lease says, and the frequent answer is neither, which is how a fit-out worth several hundred thousand ends up uninsured. Improvements and betterments are alterations a tenant makes to a space they do not own — the kitchen, the partitions, the flooring, the specialist services. The landlord’s policy typically covers the building as built; the tenant’s policy covers their contents. The fit-out sits between those two definitions and needs naming explicitly on one policy or the other.

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The detail

Improvements and betterments are alterations made by a tenant to leased premises which typically become part of the realty and cannot be removed at the end of the lease — leaving ownership, and therefore insurable interest, dependent on the lease terms.
International Risk Management Institute

What this means for you

Read the lease first. Whether the improvements become the landlord’s property on installation or at the end of the term decides who has an insurable interest.
Then check both policies actually match the lease. Two policies that both assume the other covers the fit-out is the standard failure here.
Value it at what it cost to install, not what it would fetch. A commercial kitchen has almost no resale value and a very large replacement cost.
On a triple net lease, settle this explicitly. It is the single most common gap in net-leased property.

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