In commercial construction, there are several possible conditions for a space to exist in prior to leasing agreements signed by tenant and landlord. And there are advantages and disadvantages to all. But before final “TIs” (tenant improvements) are made to make the space business-ready for the occupants, there is a stage (or a shell) that the space exists in. These options are called “cold dark shell,” “grey shell” and “warm vanilla box.”
A “cold dark shell” refers to a space without electrical, HVAC, elevators, plumbing, bathrooms, and often lacks final wall dividers. It is the bare minimum in which an interior space can be offered for commercial use. Though it lacks everything, there are some advantages for tenants to want a cold dark shell.
By offering nothing finished, everything is an option for a cold dark shell space – for tenants, the sky is the limit – they can do whatever they wish with the space. Plus, cold dark shells are usually lower lease rates than, say, a warm vanilla box (which is a much more finished space) – because there’s so much more upfront cost involved in finishing the cold dark shell space to make it business-ready.
A “grey shell” is a commercial space existing between a cold dark shell and warm vanilla box. Grey shells include elements such as HVAC in place but no finished duct work, unfinished or unpainted walls, unfinished floors, dropped ceilings (no ceiling tiles in place; exposed pipes), sprinkler system not dropped to ceiling level, no plumbing or electrical, and containing an existing point of connection for sewer. Obviously this offers some increased finished items for a tenant to consider before executing final TIs.
Finally, a “warm vanilla box” (or white box) is the most ready stage for a commercial space prior to TIs. A warm vanilla box contains elements such as finished and accessible bathrooms, fire escapes in place, finished (or at least concrete) floors, white painted/finished walls, electrical and HVAC systems in place, and ceilings finished with basic lighting.
Regardless of the shell condition, the burden of finishing costs is not typically 100% on the tenant. For lease agreements, TIs to some extent are partially covered by the landlord. In other words, the landlord agrees to help cover the costs of finishing the space to make it business-ready.
So the different commercial space finishes give occupants different options for TIs: cold dark shell, grey shell or warm vanilla box. Each stage requires different amounts of work in tenant improvements, but the more naked a space, the more options it has for tenant finishing. Based on leasing agreements, landlords share some of the costs for TIs, to attract occupants.
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