What You Need to Know about Vanilla Shells
Commercial real estate can be delivered to a tenant in a variety of conditions. The condition that a space is delivered in is classified by the amount of improvements and amenities a space has prior to being leased.
For example, grey shells or “cold dark shells” are spaces without electrical, HVAC, restrooms, elevators, etc. It’s essentially a blank canvas. The build-out for such spaces can be costly and may prolong the grand opening of a tenant’s business in that space.
But there are other shell space conditions.
Commercial properties can also be delivered as a vanilla shell, also known as “white-box condition” or “warm shells.”
Vanilla Box Finish
Think of a vanilla shell as a scoop of vanilla ice cream from an ice cream parlor – it’s ready to eat, but it needs sprinkles, a little chocolate syrup, and whip cream to be complete.
Here is a list of improvements you can expect to be present in a space delivered as a vanilla shell:
HVAC & ductwork
Finished ceiling or drop ceiling
Lighting
Finished restrooms
Elevators
A space delivered as a vanilla shell is almost the opposite of a cold dark shell – it’s almost move-in ready, as they typically have the amenities to do so besides they tenant-specific features.
What Makes Vanilla Shells So Sweet?
Build-out Time
One of the most attractive features of a vanilla shell is that the timeline of the buildout is significantly shorter than leasing a space in any other condition.
As I’m sure you guessed, this is because most vanilla shells only need paint and tenant-specific amenities; thus, there is generally less work to do during the build-out process unless the tenant’s business requires a heavily customized space.
Build-out Cost
A big factor in deciding which commercial space to choose is the costs that the space requires to suit your needs.
This is what makes vanilla shell leases are so desirable!
Along with a shorter build-out time, they also have a lower build-out cost. The reasoning behind the lower build-out cost compared to other leases is the same reason why the build-out period is usually shorter: the space has many of the amenities needed to be move-in ready.
Location
Vanilla shells are the most common type of delivery for a commercial lease.
You can find them in every area of your city in contrast to cold dark shells which are mostly found in prime locations.
Why Would You Want a Vanilla Shell?
Timing and your budget are key metrics to take into account when deciding on whether to go with a vanilla shell lease.
If you’re not willing to spend a lot of up-front costs in comparison to a cold dark shell, then a vanilla shell lease is for you. Also, if you’re not looking to spend a lot of time on a build-out, then you need a vanilla shell lease.
The not so sweet part about vanilla shell leases is that the rent rate tends to be higher than other delivery options. This justifies the costs that the landlord incurs when making the space warm vanilla shell condition. But since you don’t have to pay as much in up-front costs, this should not be too much of a concern.
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Ben Dotye's passion and eagerness to learn about commercial real estate lead him to join the team as our brokerage and acquisition intern. He has proven himself valuable by assisting our brokers, being involved in renovation projects, and much more! His goal as our intern is to learn as much as possible so that he can soon be a part of Music City's growth.
A current Business student at Rhodes College, Ben is expected to graduate in 2022. Upon graduation, he plans to dive into commercial real estate!
If you have ever started a search for commercial real estate, you likely know that it is almost guaranteed your new space will require some form of build-out. Although looming construction costs can be intimidating, tenants have the option to push for a tenant improvement allowance in order to help mitigate the costs associated with a build-out.