What is a Vanilla Shell?

Posted on December 23, 2020

In the market to buy or lease a commercial real estate (CRE) property? You’ll want to acquaint yourself with one important, common term: ‘vanilla shell.’ 

What is a Vanilla Shell?

It may sound like a delicious confectionary, but vanilla shell refers to how a CRE property is delivered to the tenant. These properties, sometimes also referred to as ‘white box’ or ‘warm shells,’ commonly feature finished interior walls, along with other amenities.

• Functioning HVAC system (hence the warm shell moniker)
• Suspended acoustic or hard lid (drywall) ceilings
• Basic flooring
• Restrooms
• Lighting

Vanilla Shell Commercial Real Estate

Surely, you noticed the disclaimer ‘commonly feature’ above. That’s because not all landlords have the same working definition of vanilla shell. Some list spaces without flooring as white box. Others may even exclude lighting and ceilings. The point? Make sure to work with an experienced CRE broker that will clearly communicate the condition of the space in question and negotiate a fair and reasonable rent or price for the property.

Vanilla shell is by far the most common way CRE properties are listed.

But what’s the alternative to a vanilla shell? That would be gray shell properties.

What is a Gray Shell?

Gray shell spaces commonly aren’t improved at all. They lack interior walls, ceilings, restrooms, flooring and even a functioning HVAC system that keeps it toasty in the winter and cool in the summer—which is also why these may be referred to as ‘cold shells.’ While it’s more costly and time-intensive to get a gray shell in working condition for your business requirements, you can customize them to meet any unique needs.

A vanilla shell may only require a coat of paint, office fixtures and computers to ‘open the doors.’ Conversely, improving a gray shell requires more investment in both time and money. Restrooms need to be built, as do interior walls. An HVAC system may need to be installed. Ceilings need to be dropped (unless you want the popular exposed look). Lighting will need to be placed, as well as everything else that’s required for a fully functioning and safe workspace.

Example of a Gray Shell Commercial Real Estate

Gray shells may be best suited for the unique needs of those tenants serving the healthcare industry or other businesses needing (or desiring) floor-to-ceiling customization. The customizability means the space can be outfitted with one or 15 bathrooms, hard flooring or soft carpet, hard lid or acoustic tile ceilings, framing for small examination rooms or large operating areas and so on.

What are the Benefits of a Vanilla Shell?

While gray shells pack impressive ‘trick out’ potential, they may not be best for most retail and office tenants, due to the cost and time required to improve them. On the other hand, vanilla shell properties come with a couple of hard-to-ignore benefits for these same tenants.

• Short improvement time
• Minimal buildout cost

Other Considerations

Before signing on the dotted line for a vanilla shell CRE property, there are a few other things you should know. Tenants may be required to white box the property upon leaving—that is, return it to its original condition. Vanilla shell properties often fetch more rent than other delivery options. And, lastly, for those white box spaces that could use paint or new flooring, make sure to have your CRE broker negotiate a tenant improvement allowance that can offset, or even cover, all the costs associated with these required upgrades before you move in.

Chris Falk is an experienced, Utah-based commercial real estate broker that specializes in and provides direction on acquisitions, dispositions and leasing. He has counseled some of the largest organizations in Utah. If you need help navigating the CRE landscape, contact him today for the representation that can help you find and secure the most fitting property for you and your business needs.