Shell Building Classifications and What Tenant Improvement Means

Understanding shell building classifications and how they translate to tenant improvements in Raleigh, NC is key when you buy commercial real estate. You need to fully understand what you’re getting, and which systems will have to be added and/or improved before your building is ready to host tenants.

Here’s an overview of shell buildings and the various tenant improvements you can make.

What is a shell building?

Shell buildings are unfinished commercial buildings. They typically include four walls and a roof, and perhaps an unfinished concrete floor. The major systems, however—like HVAC, electrical, plumbing, interior walls, elevators and lighting—are not installed. This gives the tenants the opportunity to customize the building for their specific needs. It also gives the landlord an easier time: if they’re only leasing out the shell building, the additional systems will be the tenant’s responsibility to maintain. That makes the landlord’s portion of the building a lot cheaper and easier to maintain.

There are also several shell building classifications in Raleigh, NC. These can be combined in some cases to tell the buyer exactly what’s missing:

  • Cold shell: This is the barest form of shell building. You’ll get four walls, a roof, an unfinished floor and nothing else.
  • Warm shell: These buildings have at least a partially-installed HVAC system.
  • Bare shell: This type of building is closer to ready—there might be finished bathrooms, interior walls and basic flooring in place.
  • Vanilla shell: This shell building type includes finished walls, flooring and ceilings, plumbing and lighting.
  • Dark shell: This classification means there are no lighting systems pre-installed.

What are tenant improvements?

Tenant improvements—in the case of commercial real estate, at least—involve installing important systems like electricity, plumbing, HVAC, lighting and more. Depending on who bears the cost of tenant improvements, the responsibility for maintaining each system falls on either the landlord’s or tenant’s shoulders.

In some cases, a landlord might include a tenant improvement allowance (TIA). This is usually used as an enticement to get people to rent, but not every commercial lease will come with one. TIAs offer a pre-determined amount of money to build and install the mechanical, electrical and plumbing systems necessary. This makes the building habitable for the tenants, and allows the tenants to customize their systems as needed.

If a tenant goes over the TIA, then the remaining cost is theirs to pay. Some landlords are flexible enough to offer bundling the overages into the monthly lease cost. It behooves you to negotiate TIAs with your landlord—if they’re amenable, it can save you a lot of time, money and financing hassles.

Bear in mind that TIAs do not include furniture or other moving and startup costs. You’ll also need to have the capital to pay for improvements at the outset—your landlord will likely reimburse you for improvements as agreed.

For help with electrical tenant improvements in Raleigh, NC, get in touch with Box Electric Company today. We can help design and install your systems from scratch.