Second-generation medical space vs. shell space

Second-generation space has already been built out for a previous tenant. Shell space has never been finished. A second-generation suite can save money and time when its layout and systems fit your practice, and it can cost more than a shell when they do not. The way to know is to inspect the space against your plan before you sign the lease.

What the terms mean

Brokers and landlords use these terms loosely, so ask for specifics.

• Shell (or cold dark shell). Exterior walls, roof, and a storefront. Often no slab in parts of the floor, no ceiling, no restroom, and no air conditioning. Utilities are stubbed to the space.
• Warm shell or white box. A shell with some landlord work done, such as a finished slab, basic air conditioning, a restroom, a ceiling grid, and lighting. What is included varies by building.
• Second-generation space. A suite a previous tenant built out and left. It may have been a medical or dental office, or something unrelated.

When second-generation space works well

Reuse pays when the expensive parts of the previous build-out are in the right place for you. Those parts are plumbing, air conditioning, electrical service, and the walls that enclose wet or shielded rooms. A former clinic with exam rooms the size you need, sinks where you want them, and restrooms that meet current accessibility standards can be refreshed with new finishes, casework, and lighting.

It works less well when the use changes. A dental office moving into a former medical clinic still needs utilities under the slab at every chair. A clinic moving into a former dental office inherits floor boxes and plumbing it does not need and may have too few exam sinks. Once more than a modest share of the walls and plumbing has to move, the savings shrink quickly, and demolition is added to the cost.

What to inspect in a second-generation suite

Walk the space with your contractor and, if possible, your architect and equipment supplier. Bring your room list.

• Plumbing locations. Where are the sinks, drains, and floor penetrations compared with your plan? Is the space on grade or over an occupied floor?
• Air conditioning. Age, capacity, condition, and who owns and maintains the units. Medical rooms often need more outside air and exhaust than an office.
• Electrical service. Panel capacity and spare space for imaging, sterilizers, compressors, or lasers.
• Ceiling height and the space above it. Room for ductwork, lights, and any ceiling-mounted equipment.
• Accessibility. Restrooms, door clearances, and reception counters built years ago may not meet the current Texas Accessibility Standards. Alterations generally have to comply, and work in the altered area can trigger upgrades along the route to it.
• X-ray shielding. Existing lead in walls was designed for the previous machine and layout. It has to be evaluated for yours.
• Medical gas. Existing piping cannot be assumed usable. Modified systems need testing and verification under NFPA 99.
• Fire sprinkler and alarm. Moving walls means moving heads and devices.
• Hidden conditions. Look above the ceiling. Abandoned ductwork, undersized structure, and unpermitted work are common finds.
• Records. Ask the landlord for the previous tenant's drawings and the certificate of occupancy.

Texas requirements that apply to renovations

A renovation needs a city building permit just as a new build-out does, and the city reviews it under the codes in force today, not the codes in force when the space was first built. If the previous tenant's use was different from yours, the city may treat the project as a change of use, which can add requirements.

Texas requires an asbestos survey of the area being renovated before work starts in a commercial building, whatever its age, and the city will ask for proof before it issues the permit. For a newer building, a city may instead accept a certification from a Texas architect or engineer that the affected area contains no asbestos. Ask the landlord whether a survey exists.

The state accessibility review applies as well. Projects with an estimated construction cost of $50,000 or more are registered with the Texas Department of Licensing and Regulation (TDLR) and reviewed and inspected by a registered accessibility specialist. Smaller projects still have to meet the Texas Accessibility Standards, but they do not have to be registered.

When shell space is the better choice

A shell costs more to finish because everything is new: slab, plumbing, air conditioning, electrical distribution, walls, ceilings, and finishes. In return you get a layout drawn for your practice, new systems under warranty, and no demolition or hidden conditions. For uses with heavy under-slab plumbing, such as dental and veterinary, a shell with the slab left out is often the simplest place to build.

Shell space usually comes with a larger tenant improvement allowance from the landlord than second-generation space. Compare the two on your net cost after the allowance, not on the construction price alone.

In a shell, read the landlord's work letter closely. It should say what the landlord delivers and when: the slab, the electrical service size, the air conditioning units or an allowance for them, the sprinkler main, the restroom, and utility meters.

Side by side

• Up-front construction cost. Second-generation is usually lower when the layout fits. Shell is higher.
• Landlord allowance. Usually smaller for second-generation, larger for shell.
• Layout. Second-generation means working around what is there. Shell is designed to your plan.
• Schedule. Second-generation can be shorter with light changes. Shell carries a full design and construction period.
• Unknowns. Second-generation carries hidden conditions and older systems. Shell has few.
• Equipment life. Second-generation air conditioning and water heaters may be partway through their service life. Shell equipment is new.

How to decide

Which space costs less depends mostly on how much of the existing plumbing and wall layout can be reused. Ask for a test fit and a budget on each space you are serious about. A test fit is a quick floor plan showing whether your rooms fit. A budget built on it shows what each option costs after the landlord's allowance. Comparing the two takes a short time and can change which space is the better deal.

We will walk a space with you before you sign the lease, and there is no charge for the first budget. It is an early range, and a detailed estimate comes later, priced from the drawings.

Structures and Interiors finishes out both, and we build new buildings from the ground up as well; see shell and finish-out in one contract. See our medical construction and dental office construction pages. For examples, the Celina Medical Office Building Shell shows a new building before tenant work, and Fort Worth Plastic Surgery shows a finished clinical suite.

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