Finishing Out Shell Space in Houston
New retail centers, flex buildings, office projects and mixed-use developments across the Houston area are often delivered as shell space. The landlord builds the structure and the exterior, and the tenant improvement work happens later, once a tenant signs. The trouble is that "shell" means different things to different people. One landlord's warm shell is another landlord's cold shell, and the gap between them can change the scope of a buildout dramatically.
This guide explains the common shell delivery terms, what each one typically includes, and what landlords, tenants and investors should confirm in writing before a finish-out begins.
This page is general information, not legal, design or engineering advice. The exact meaning of any delivery condition depends on your lease and drawings, so review them with your attorney and design team.
Why the delivery condition matters
The delivery condition is the starting line for the tenant's buildout. It decides who builds the restrooms, who brings the utilities into the suite, who installs the HVAC, and who pays for the fire sprinkler work. If the lease is vague, the landlord and tenant can each assume the other is covering items, and the project stalls while they sort it out.
Our guide to landlord work vs tenant work letters explains how leases divide this work. This guide focuses on the physical condition of the space.
Cold shell (also called gray shell or dark shell)
A cold shell is the most basic delivery. It usually includes:
- Structure, roof and exterior walls
- Storefront or exterior openings, sometimes without doors or glass
- A slab, which may be left unfinished or partially poured to allow plumbing work
- Utilities brought to the building or a common point, but not into the suite
A cold shell often does not include interior walls, restrooms, ceilings, lighting, HVAC distribution or finished floors. Some cold shells don't include the full slab, so plumbing can be trenched in later without cutting concrete.
Cold shell space gives the tenant the most flexibility and the largest scope of work.
Warm shell
A warm shell typically adds the basic systems needed to make the space usable. It may include:
- Completed slab
- Demising walls between suites, often taped and ready for finish
- Electrical service into the suite with a panel
- HVAC units installed, with limited distribution
- Fire sprinkler main lines and heads at a basic layout
- Water and sewer stubbed into the space
- Sometimes basic restrooms
Warm shell is a common middle ground for retail and office.
Vanilla shell (also called white box)
A vanilla shell is closer to move-in ready. It may include:
- Restrooms built to code
- Ceilings and basic lighting
- HVAC distribution and controls
- Painted walls
- Basic floor finish or a sealed slab
- Fire alarm and sprinkler coverage
The tenant then adds its own layout walls, finishes, fixtures and specialty systems.
Second-generation space
Space that a prior tenant built out and left behind is often called second-generation space. It can save time if the layout and systems fit, but it may need demolition if they don't. Our guide to second-generation space in Houston explains how to evaluate it.
Questions to confirm before you sign
Because the terms are not standardized, confirm the specifics in writing:
- Slab: Fully poured or left open for plumbing? Level and ready for flooring?
- Electrical: Is service in the suite? What size panel? Is there room for more?
- HVAC: Are rooftop units installed? Sized for what use? Who handles ductwork and controls?
- Plumbing: Where are water and sewer stubs? Is there a grease line for restaurants?
- Restrooms: Included, and accessible?
- Fire protection: Are sprinkler mains installed? Is there a fire alarm panel for the building?
- Ceilings and lighting: Included or not?
- Storefront and doors: Installed and finished?
- Roof penetrations: Who handles new curbs for exhaust or equipment?
- Utilities and meters: Separately metered? Who sets the meter?
Ask for the shell drawings and a written delivery exhibit. Walk the space before construction starts and photograph its condition.
Utilities can set the schedule
In new developments, utility work often controls when a buildout can start or finish. Electrical service, water and sewer taps, gas service and backflow devices all have their own lead times. Our guide to commercial electrical service upgrade planning explains how power capacity affects a project, and Houston Public Works administers water and wastewater service inside the city.
Use-specific needs
Different tenant types need very different things from a shell:
- Restaurants and coffee shops need grease lines, hood exhaust and larger gas and electrical service. See our restaurant buildout checklist and our guide to coffee shop and drive-thru buildouts.
- Medical and dental offices need more plumbing, power and data. See our guide to medical office buildout considerations.
- Fitness and assembly uses may need different exits, restrooms and fire protection.
- Laboratories need heavy ventilation and power. Our guide to laboratory buildouts covers those needs.
Make sure the shell can support your use before you commit.
Permits and inspections
Inside the city, tenant finish-out work generally requires building permits and inspections through the Houston Permitting Center. The tenant's buildout is usually a separate permit from the shell. Fire marshal review may also apply. Our guide to the buildout permit process in Houston explains the sequence, and our guide to certificates of occupancy explains what is needed before opening.
Accessibility rules apply to restrooms, entrances and routes in commercial spaces. Federal guidance is at ADA.gov, and Texas has its own architectural barriers program administered by TDLR. Review accessibility questions with your attorney and design professional.
Allowances and pricing structure
Tenant improvement allowances are often tied to the delivery condition. A tenant in cold shell space may need a larger allowance to reach the same finished result as a tenant in vanilla shell space. Our guide to turnkey vs TI allowance buildouts explains how tenants can compare offers, and our guide to what drives tenant improvement costs explains the main cost factors.
Tips for landlords
- Write a clear delivery exhibit with drawings.
- Size utilities for the likely tenant types.
- Coordinate roof penetrations and curbs early.
- Keep shell drawings and permits organized for future tenants.
Tips for tenants
- Get a contractor to walk the shell before you sign.
- Confirm everything in writing.
- Ask about utility lead times.
- Plan your layout around existing plumbing and structure.
Quick checklist
- Delivery condition defined in writing
- Shell drawings reviewed
- Slab, electrical, HVAC, plumbing and fire protection confirmed
- Restrooms and accessibility addressed
- Utility lead times known
- Use-specific needs checked
- Permits planned
- Lease reviewed with your attorney
Clear shell definitions prevent disputes and keep a finish-out on schedule. The more detail both sides agree on before the lease is signed, the smoother the buildout.
Planning a shell space finish-out in Houston? BPC Development LLC provides free on-site estimates in Houston, TX. Call (281) 301-4737.