[ecis2016.org] Bare shell refers to a property, whose construction is completed and the basic building services are in place. We examine what property buyers should be aware of before invesing in such units
When you try to explore real estate and the numerous investment options, it is natural that you will come across numerous terms that may confuse you. One such term is a ‘bare shell’ property. In this article, we are going to understand the term.
You are reading: Everything you need to know about bare shell property
What is a bare shell property?
Bare shell refers to a property, whose construction is completed and the basic building services are in place. However, such properties have unfurnished interiors and lack heating, ventilation and air-conditioning (HVAC) systems, lighting, plumbing and elevators.
Bare shell vs warm shell property
Both bare shell and warm shell properties are popular in the market. It depends on the purchaser whether he/she/they wish to invest on customising the property or not. For those who prefer customisation, bare shell properties are great. It is easier to plan and design these further. However, if your budget does not permit you to go overboard with the interior design, warm shell or semi-furnished properties are better. We have listed the following differences between bare shell and warm shell units.
Bare shell
| Bare shell | Warm shell |
| Unfurnished property | Property with minimal furnishing |
| Refers to a property right after the stage of construction | After construction, basic facilities are put in place |
| Also known as unfurnished property | Also known as semi-furnished or vanilla shell property |
| Does not have heating, ventilation and air-conditioning (HVAC) systems, lighting, plumbing and elevators. | Includes finished interiors such as a heating and cooling (HVAC) system, lightings, restrooms, drop ceiling, plumbing and flooring, among others. |
| Needs basic amenities in place before it can be used | Ready-to-use |
| Preferred by end-users who want to design their home as per their convenience and lifestyle | Preferred by consumers looking for lower cost of entry, when compared to fully-furnished homes. |
| Ideal for startups, corporates or those looking to customise their property as per their lifestyle | Suitable for those who do not wish to spend a lot on doing-up their place |
| More popular in residential segments | More prevalent in office and commercial segments |
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Warm shell
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Shell condition and the commercial property market
In any of the shell conditions, a commercial property will be provided on lease or sale with three given characteristics which include the roof, the exterior walls and concrete flooring. After this, depending on what your requirements are, you can ask for other amenities.
| Shell condition | Characteristics |
| Cold Shell | Is the barest and is often bought rather than being leased. |
| Warm shell | Has partial HVAC system and often fully-functional core systems like electrical, mechanical, restrooms, etc. that are ready for use. |
| Dark shell | No lighting or electricity wiring. |
| Bare shell | Plastered walls, basic flooring, bathrooms and kitchens are present, with no ornamentation. |
| Vanilla shell | Slightly more finished than warm shell but the term can often be confusing. |
You may find some combination shell conditions in the lease market as well.
Benefits of considering a property in bare shell, warm shell conditions
Different people and businesses have different requirements and therefore, we cannot generalise and say that one is better than the other. By opting for a property in any of the aforementioned shell conditions, you can benefit in the following ways:
You have the power of flexibility
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Wish to customise your office or residential space? You can opt for a bare shell property. If you do not have the time or capital to invest in hiring architects and designers, you can choose a more prepared and finished unit at your disposal too.
Save on rent
With flexibility comes the benefit to spend or save on rent. Warm shell or vanilla shell properties may be slightly easier on your pocket given that you do not need to invest additional capital to do up the place. You can also negotiate with the landlord.
Easier to manage, longevity assured for landlord
For landlords leasing bare shell or cold shell properties, it becomes easier to manage, too. For example, if the HVAC system is installed by the tenant, the latter has the responsibility to ensure that everything is working well. It is not included in the landlord’s list of expenses. On the other hand, the tenant may stay put for a longer period of time, given their efforts in designing, installing and ensuring that everything works well.
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Points to consider when investing in a property in a shell condition
While we cannot call these demerits, because the consumer goes with either of the shell conditions for a reason, you may want to note the following:
- In case of a bare-shell property, the cost and time involved to renovate the place can be extensive. Calculate these costs beforehand.
- Once you do up a property, it is not easy to move out easily. Go for it only if you have long-term plans to continue with the property.
- Converting a bare shell property into any other is labour-intensive and you will need research, focus and due diligence before you get started with your plan.
- There may be construction delays to account for. Be flexible about your timeline.
- If you are leasing a bare shell space, know that there are very niche tenants in this space and your wait could get longer. So do not expect tenants immediately after your property is up on lease.
- When letting out your bare shell property, you also need to be aware of the terms and conditions, as well as the exit-stage state of the property.
- If you are a tenant opting for a bare shell property or a property in any shell condition, try asking for an improvement allowance. A landlord too has his interest in the property and if your negotiation works you may get lucky. If not, plan your budget rather than going overboard with it.
FAQ
What is the meaning of shell condition in real estate?
By using the term ‘shell condition’, one is essentially referring to the interior condition of the property.
Are bare shell properties cheaper?
On the contrary, bare shell properties can be expensive. Tenants who go in for bare shell properties usually do so, to have the flexibility to re-design the space as per their liking, requirement and style. Hence, they may end up spending more.
Do the terms bare shell and warm shell apply to residential properties?
You may have heard the term warm shell office space or bare shell office space but yes, the same jargons apply to residential real estate also. Most investors may, however, refer to these as unfurnished, semi-furnished or fully-furnished properties.
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