Vanilla or cold dark shell? Know your lease agreement terms

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When it comes to commercial lease agreements, navigating the many terms can seem daunting. For instance, what is a second-generation lease, and why should you consider one? Is a cold dark shell lease a good or a bad thing? In our extensive glossary of commercial lease terms, you can explore a long list of real estate jargon to help you navigate your next lease negotiation.

For this short blog, let’s cover just three key lease terms that will interest those looking to understand their options when signing agreements.

Vanilla shell lease

Vanilla shall leases or white box condition leases can be attractive options for new tenants. These leases refer to commercial spaces that are ready to be occupied and contain most (if not all) of the necessary amenities for doing business. This means new tenants will find the property outfitted with plumbing, lighting, flooring, ceilings, air-conditioning, etc. The base rent in such spaces tends to be higher.

Cold dark shell lease

Cold dark shell leases can be a daunting prospect, but the advantage is that they usually have a lower base rent. This is a lease where the commercial space is not outfitted with the necessary amenities to do business. Tenants will need to invest in plumbing, lighting, flooring, etc. It’s recommended that tenants negotiate a sizable tenant improvement allowance to cover the cost of getting the space ready for business.

Second-generation commercial leases

A second-generation commercial lease might be a welcome opportunity for tenants who don’t want the responsibility of completely outfitting a space for commercial purposes. An example might be a hairdresser looking to lease a space that was previously used as a hair salon so that many of the amenities required will already exist in the space. The disadvantage of such a lease is inheriting sometimes outdated or old equipment and struggling to make the space unique. The advantage is the reduction in costs. Tenants can expect higher base rent for second-generation spaces.

Check our extensive glossary of lease terms to learn more about commercial lease agreements. 

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