Know the Different Types of Space
Part of estimating costs is knowing the type of space you’re moving into. There are three types. This is part III of a series.
The first kind is shell space. Shell space refers to an exterior shell of a building that’s left in a deliberately unfinished state. It has floors, walls, windows, and a roof, but that’s about it. No dividing walls to separate future bickering employees. Maybe some rudimentary HVAC, plumbing, and even some electrical.
This is space with zero occupant history. It’s tabula rasa for that lucky first.
This is the kind of space that comes with new construction. It can also be found in older buildings if a landlord has demolished a floor.
Taking over shell space is an opportunity to jump in and compose a creative vision that’s uniquely yours. And you get to do it without having to rip out any preexisting features. If you’re the kind of person who needs to completely customize the look of your space, you’re going to want this kind of space to work with.
There are two different types of shell space.
Warm shell space includes interior walls and wiring. You’re also going to have finished ceilings, lighting, and some HVAC. Cold shells are completely unfinished. The only walls in the building are exterior ones. The floors are bare, and the ceilings exposed.
There's a benefit to a shell build-out. That is, you’ll get more improvement money for shell than you would get for second generation space. In other words, more money to complete the build-out.
And more money under your creative control.
Buy or rent shell space, and you get to configure things without the bother of already-standing walls. It’s your blank canvas waiting for any dream you can breathe into it. But remember that if you’re using tenant improvement money, there might be limitations how you can use it.
So, find out what it covers and what it won’t.
Second Generation Space
Another kind is second generation space or 2nd gen. This is space with a preexisting build-out and its HVAC is already installed. You'll see plenty of walls, finished ceilings, and plumbing in 2nd generation space.
It requires much less work than building-out a shell space. So, it’s cheaper to get in move-in-ready shape. 2nd gen space is easier to find, too. There’s always a lot more preexisting space than new space.
But the downside is you’re also going to get less tenant improvement money.
Because this type has been occupied, you can move in right away without having to do too many renovations.
This can be a way to save time. By taking the space “as is” you’ll also probably end up paying a lower rent. That’s because your landlord doesn’t have to give you any tenant improvement money.
But it’s likely that you’ll at least want to make some changes. Like, replacing the carpet and painting the walls a different color. You might even want to redo some of the layout to better accommodate your needs.
The third type of space is spec space.
This is similar to 2nd gen space because everything is fully finished. It’s just waiting for occupants. But with spec space, the landlord finished the office in a way they imagine the occupants might like.
Nobody has actually occupied the space before you, so it isn’t field-tested.
Because the landlord has already spent a considerable amount of money to finish out the space, it’s unlikely that you’ll get much improvement money. But spec space is in move-in condition from the moment you sign those lease papers.