Image credits: CARR
Commercial properties have various initial conditions in which they get delivered to tenants based on what they require. Usually, these leasable building conditions or types are available as raw shell spaces – which is as minimum as you can get in terms of the given features. A warm vanilla shell is one such commercial configuration, and here is a deeper look into what it means.
Warm Vanilla Shell
In commercial real estate, the word “shell” represents an unoccupied, bare-minimum building space that has a long way to go before the opening day. Such an interior could be partially finished or not finished at all depending on what a potential tenant is looking for. Commercial buildings are delivered in their basic shell conditions because of the flexibility and customization they offer to different businesses. A shell space includes the basic exterior walls and an open floor plan with optional utilities – the tenants can then fit out the area using just the right amenities to suit their commercial scope. Shells have different versions to represent the levels of infrastructural and technical details within the space, so this is where we meet a warm vanilla shell. The opposite would be a cold grey shell, and both are the two main categories of a building shell type.
Going a step up from the basic shell space, a warm vanilla shell is partially finished and includes some major amenities installed by the building owner.
Warm vanilla refers to the interior itself, and it is one of the most common building conditions in which commercial properties are delivered to tenants. “Warm” indicates a fully-installed HVAC system that is ready to use (to warm up or cool down the space), whereas “vanilla” represents additional utilities like finished walls and lighting that give the interior a canvas-like appeal. You will generally find the following elements in a warm vanilla shell:
- Drop-grid ceilings
- MEP utilities
- Functional HVAC
- Proper flooring
The actual features will always differ based on your specific needs as the commercial tenant of the building. Warm vanilla can mean different things to different audiences, so you have to get the details right with your building owner before signing the lease – and avoid dreadful “expectations vs reality” results. Most retail and office tenants prefer the convenience of a warm vanilla shell delivery because the major amenities are already in place, so they simply need to handle the décor or furniture movement before moving in.
Warm vanilla shell conditions are beneficial for both tenants and building owners. Here are some top benefits of leasing a commercial property in its warm vanilla form:
- For building owners, providing such a space is more cost-effective and quicker compared to investing huge amounts of money into improvements that the tenant may or may not like – in which case, all the additions will need to be torn down. Building owners can have their commercial properties brought to the warm vanilla status much faster than totally finishing the space. This increases their probability of leasing the building and securing faster rents – as the interested tenant pool for warm vanilla shells is vast.
- For tenants – especially retail and office tenants – warm vanilla shells enable quicker move-in times as well as reduced upfront costs. Warm vanilla is a step up from a basic shell condition and still below a fully-finished space, so it is the ideal middle ground for anyone looking to move in quickly. The main infrastructure is already in place, so these tenants can customize the remaining aspects more easily – and allocate more budget to commercial aesthetics. Warm vanilla shells are preferred by tenants who have neither the time nor the budget for a full-scale fit-out. Since retail and office tenants usually lease commercial spaces for a few years, it does not make sense to pay for fully customized spaces from scratch – only to leave all of this behind after 2 years, for example.
While warm vanilla is ideal for retail and office tenants, they are not the best leasable condition for technical commercial audiences like hospitals. This is because medical spaces require strict compliance with building codes, so they have very specific infrastructural, technical, and safety needs. The walls, flooring, MEP framework, ceilings, etc. should all conform to the medical guidelines considering specialty equipment and technologies used within the four walls. This is something the building owner should keep in mind before updating the shell version, so it is important to be familiar with the neighborhood and the existing tenant pool.
Tenants should also find out whether they need to restore their space to its warm vanilla condition – the white box – at the end of their lease. Since the work is nearly halfway done, warm vanilla shells do not leave a huge scope for tenant improvement allowances. By definition, it is generally agreed that any physical upgrades added by the tenant will stay behind – which means that the owner can always reuse them for the next lease. This can be one promising negotiation area to strike a good allowance if you intend to install something massive. In addition, building owners tend to charge higher rents to compensate for the extra work they had to do to white-box the space. So, the upfront benefits might be offset by these limitations, which is why it is important to get an agent on board to reinforce your negotiation grounds.
Customizing Your Vanilla Scoop
Before signing your lease papers, make sure to confirm which additional features you can add to the shell in terms of code compliance, project feasibility, and allowance coverage. Since most of the functional aspects are covered by the owner, this leaves you with more freedom to explore décor options, layout styles, and workspace creativity.
You can get in touch with a commercial real estate agent to find the most suitable warm vanilla shell, understand your lease terms, and discover your fit-out potential. Consulting a commercial expert will help you be more aware of the finances that revolve around your chosen premises, especially if you are strict on budget. As we saw above, the low upfront costs are a huge incentive for most commercial tenants, but they often forget that this also translates into higher rents down the road. By discussing these areas with someone who is not the building owner, you can get an unbiased and relevant analysis of your project to begin doing what you do best: run a business!