Leasehold estates, often referred to as “white box”, cold shell, grey box or vanilla shell, may sound like jargon to the layman but for entrepreneurs privy to fresh commercial contracts, the terminologies are fairly common in discussions about construction plans. A familiarity with the terminologies plays a vital role in making the right decisions in the complex domain of property and construction, leading to delays and costly implications.
Once you’ve stepped into the arena bidding for your construction project or negotiating the commercial property for lease, all parties involved need to rely on the same definition of the white box or any other real estate in question, so to steer clear from miscommunication or misunderstandings. A clear understanding of every aspect of a project is instrumental in managing costs and meeting the desired outcomes effectively.
This article aims to debunk the term “white box construction” in contrast to various construction shells or conditions, highlighting the associated costs and benefits.
What is White Box Construction?
In the realm of commercial construction, white box or vanilla shell, is synonymous to a partially finished commercial area that a contractor hands over to the landlord or the tenant.
The name “white box” is derived from its appearance, showcasing a minimally finished space featuring a white dropped ceiling and white sheet-rocked walls. This term characterizes the initial state of a commercial space prior to any remodeling or tenant-specific finishes.
Inclusions in a white box are:
Within the blank canvas, there are insulating tenant separation walls made of drywall, prepared for the occupants’ painting preferences. It features a storefront door, windows for ample natural light, and a resilient concrete floor.
A blank canvas configuration accommodates one or two bathrooms, meeting regulatory requirements, and equipped with all ADA-compliant amenities. These include vinyl tile floors, pristine white drywalls, doors fitted with standard ADA hardware, a door closer, and a privacy lockset.
The external framework is a comprehensive and finalized structural arrangement for the edifice, a perfected roofing system according to the landlord’s specifications, and a full posterior barrier, typically constructed with steel studs, drywall, or another material determined by the landlord.
In compliance with necessary codes, a blank container contains all necessary plumbing elements and links for mandated washrooms, a janitor’s sink, and a water dispenser.
Heating, Ventilation, and Air Conditioning (HVAC):
The property owner is set to set up necessary air managing units for the RTU, primary truck lines, ducts, distribution grilles, and diffusers.
In the building’s electrical room, there’s a white box containing a meter blank and disconnect, adhering to specific requirements:
– 200 amp 120/208v, three-phase, four-wire service, or as provided by the utility vendor.
– Emergency lighting, meeting the necessary standards set by the State Fire Marshal or regulations in place.
– Installation of one or two standard duplex outlets, each with 110v capacity.
– Provision of electrical components for restroom(s), including an exhaust fan, disconnect, and maintenance outlet at the RTU.
– Implementation of a dedicated sign circuit for the tenant’s building front signage.
– Installation of conduits to accommodate phone, data, and cable services.
Fire Suppression System
The landlord will implement the necessary sprinkler system, incorporating standard brass heads turned upright to the floor deck with maximum spacing to comply with fire code standards.
A white box finish excludes the following:
– Interior walls finishing, painting, or wallpaper (except for restrooms).
– Plumbing fixtures, excluding drinking fountains and code-required restroom fixtures.
– Upgraded electrical fixtures.
– Security systems.
– Telephone, cable, and data wiring.
– Modifications to the HVAC system layout.
The clean lines and basic finish of a white box real estate appeal to tenants who can readily see the potential of this partially-finished space. With a white box finish, tenants can quickly adapt the structure to suit their preferences, customizing it to their business needs.
Distinguishing White Box from Grey Box in Commercial Construction
Once you grasp the inclusions and exclusions of a white box construction, it’s essential to delve into other types of commercial construction shells.
Grey Box or Cold Shell
A grey box denotes an unfinished commercial space characterized by:
– Absence of plumbing and electrical installations
– Possible inclusion of an HVAC unit, but lacking controls or ductwork
– Optional sprinkler system meeting code requirements, but not extending to ceiling height
– Unfinished floors
– Bare stud walls
Warm Grey Box
In a warm grey box, the HVAC system, electrical, and plumbing essentials are in place, yet permanent lighting is absent.
Cold Grey Box
Contrarily, a cold grey box lacks a permanent HVAC system and any finishing touches. It remains as bare as the structural shell, with only perimeter walls and a roof in position.
A fully-finished commercial space exhibits all the features of its previous occupant or, in the case of a new build, encompasses finished flooring, paint, ceiling, doors, and cabinetry. Opting for a white box shell grants tenants an almost-complete space, ensuring a swift move-in process, whereas a grey shell demands additional finishing work to finalize the structure. Finishing a white box shell typically incurs costs ranging from $5 to $20 per square foot, whereas a grey shell finishing can range from $30 to over $100 per square foot. This variance underscores the differentiating factors in cost and completion between these two commercial construction approaches.
Benefits of Opting for a White Box Approach in Construction
Varied tenants often harbor diverse preferences when it comes to design, layout, and the specific requirements that align with their business operations. Given the challenge of anticipating the unique needs of each tenant, adopting a white box construction approach that allows tenants to add their finishing touches proves to be a practical and effective strategy.
Here are additional advantages associated with the implementation of a white box structure:
- Enhanced Flexibility: The blank canvas nature of a white box provides tenants with ample space to craft and tailor the environment according to their specific requirements.
- Time and Cost Efficiency: Opting for a white box construction facilitates a quicker design and build process, leading to cost savings.
- Economical Build-Out: Basic finishes are already in place with a white box, resulting in lower costs for the build-out phase.
- Sustainable Construction: The absence of pre-installed fittings means there is zero waste, as tenants do not need to remove or discard unnecessary elements. This contributes to a more environmentally friendly and sustainable construction process.
How much does it cost to transform a commercial space into a blank canvas?
The expenses associated with turning a space into a white box are influenced by the current condition and size of the area, along with the specific definitions and scopes of work involved. The key stages in creating a white box space generally include obtaining necessary permits, carrying out demolition, and executing the construction.
– Acquiring Permits
Identifying the specific work scope requiring permits and determining the extent of these permits is crucial before initiating any construction. A potential necessity might be a demolition permit, and the associated cost varies based on the scale of the demolition project.
For white box construction, a comprehensive building permit is essential for additional scopes of work such as:
– Expanding or relocating the HVAC system
– Erecting drywall around exterior walls
– Creating smaller offices with dividers and demising walls
– Installing required exit signs according to life safety code
– Installing lighting beyond code requirements
– Setting up dropped ceilings
– Modifying and relocating sprinkler heads
Costs for permits can fluctuate, with a small-scale demolition permit potentially reaching $250, while a full building permit may exceed $1,000. In addition to permit costs, engaging a permit expeditor might be necessary, incurring an additional expense of over $1,500.
Outlined below are the necessary scopes of work and their estimated costs to achieve a white box finish:
– Applying concrete flooring – $3-5 per square foot
– Setting up HVAC units with controls, supply and return air systems – $5-10 per square foot
– Installing outlets, lighting, and electrical switches – $3-5 per square foot
– Constructing restrooms to code – $5,000-10,000 per restroom
– Plumbing, electrical, and mechanical engineering services – $1.50 per square foot
– Installing dropped ceilings with tiles – $3-5 per square foot
– Implementing drywall to subdivide the space – $5-10 per linear foot
– Architectural services – $3 per square foot
– Project management services – 5% of managed costs
– Accessibility inspection charge – approximately $1,500 for inspection and plan review (for projects exceeding $50,000)
Despite the seemingly minimalistic appearance of a white box project upon completion, the process involved in achieving this finish demands attention to detail. All aspects must adhere to building codes and be prepared for subsequent tenant improvements.
Creating a White Box Build-Out
A white box build-out is the process of preparing a commercial space for use. This involves installing essential elements such as lighting, flooring, interior walls, and dividers, along with other necessary furnishings. In this construction approach, landlords have a couple of options. They can either supply materials for tenants to install, or they may provide a rent-free period for tenants to conduct the construction without furnishing the build-out materials.
To facilitate the white box build-out, landlords can offer a Tenant Improvement Allowance (TIA). This allowance is specifically designed to support the configuration and enhancement of the space according to the tenant’s requirements. However, it’s important to note that the TIA covers only crucial aspects needed to make the space operational. This excludes expenses related to furniture, fixtures, and equipment (FFE), as well as items like paint, wallpaper, and other upgrades more closely associated with the business rather than the building itself.
Typically, tenants are responsible for the initial build-out costs. The landlord may reimburse the TIA through progress payments based on completed work or as a lump sum payment upon the completion of the tenant’s construction. The TIA is commonly calculated per square foot and presented as a total dollar amount, with the exact figure being determined during lease negotiations between the landlord and the tenant.
Concluding the Rental Contract
Before completing a white box build-out, the landlord and tenant should engage in negotiations and formally sign a lease agreement. This crucial step helps the landlord avoid covering unnecessary or undesired enhancements. Due to potential differing interpretations, the lease agreement must be comprehensive to prevent any confusion, extra costs, or legal complications. It’s essential that the agreement explicitly outlines all construction activities. Seeking legal advice may prove beneficial, particularly for extended or high-value leases, to ensure clarity and understanding of all terms by both parties.
Curating the Contractor for White Box Construction
To achieve success in your white box construction venture, seek out a trustworthy contractor capable of:
– Guiding the client through the planning and permitting phases
Look for a contractor equipped with a licensed in-house architect or reliable referrals to those well-versed in plan and building code requirements. The contractor should secure all necessary permits before commencing construction.
– Presenting a comprehensive and detailed breakdown of costs
Ensure the contractor furnishes a cost estimate covering all aspects of the project. Transparency is key – there should be no concealed fees. Any adjustments or modifications should be communicated clearly to the client.
– Ensuring prompt progress
The contractor needs to establish and adhere to a systematic construction project schedule. Every step should proceed on schedule, minimizing any potential delays. Consistent communication, quick responses, and maintaining high construction standards contribute to a swift turnaround while keeping the client in the loop.
Considering the incurred costs of construction, what prompts a property owner to choose delivering a commercial space in a pristine, untouched state? White box construction serves commercial space proprietors aiming to swiftly attract a new tenant. The white box finish provides the tenant with the flexibility to personalize enhancements and features in alignment with their business requirements.
The advantage of a white box finish lies in its ability to allow tenants to swiftly adapt the space to their preferences and specific needs. Additionally, a white box setting enhances the appeal to potential clients, especially when transitioning from a raw and incomplete state.
Prospective tenants gain the ability to envision and strategize their layout more effectively, simplifying the process of fitting their FFE into the commercial space. Opting for a white box comes with perks for potential tenants who find satisfaction in the existing finishes, minimizing the effort required for space build-out compared to a cold shell condition.
In summary, leasing out a white box space proves to be a faster and potentially more lucrative method, offering a longer-term commitment and a higher rental rate than a commercial space in a cold shell or barren state.
What is White Box Construction?
In commercial construction, White Box or Vanilla Shell refers to a partially finished commercial space handed over by a contractor to the landlord or tenant. It is characterized by a minimal finish, featuring a white dropped ceiling and white sheet-rocked walls.
What does a White Box include?
A White Box includes insulating tenant separation walls, storefront door, windows, resilient concrete floor, one or two ADA-compliant bathrooms, a comprehensive external structure, plumbing, HVAC setup, and necessary electrical components.
What does a White Box exclude?
A White Box does not include finished interior walls, plumbing fixtures (except basic restroom elements), upgraded electrical fixtures, security systems, telephone/data/cable wiring, and modifications to HVAC system layout.
How does White Box differ from Grey Box in commercial construction?
White Box is a partially finished space, while Grey Box (Cold Shell) is unfinished, lacking plumbing, electrical, and may have unfinished floors. Warm Grey Box has HVAC but no permanent lighting, and Cold Grey Box lacks permanent HVAC and finishes.
What are the benefits of opting for a White Box approach in construction?
Benefits include enhanced flexibility for tenants, time and cost efficiency, economical build-out, and a sustainable construction process with minimal waste. The blank canvas nature allows tenants to tailor the space to their specific needs.