Commercial Wisdom

Have you ever heard of the expression “vanilla box” in real estate? What does it mean in real estate?

In leasing newly constructed office or retail space, the developer or landlord will typically refer to the state of premises as being a “vanilla box”. What this means for the prospective tenant is that they will receive the premises with four perimeter walls finished in drywall, a bare concrete floor, an exposed ceiling and an electrical distribution panel. If leasing a retail or shop space, the landlord will also typically provide a finished and working bathroom. Before opening for business, the prospective tenant (at its expense) will then have to finish the perimeter walls (paint or paper), build any interior walls or offices, install a floor covering (i.e. tiles, carpeting), install an air-conditioning system, install a ceiling with lighting and undertake the electrical installation (i.e. plugs, light switches, telephone lines, computer cabling). A landlord typically gives a tenant anywhere from 60 to 90 days rent free to do lease improvements.

During the period of the lease agreement, the tenant typically only has a contractual interest in the leasehold improvements and upon the expiration of the lease these leasehold improvements then become the property of the landlord having been attached to the landlord’s walls, floor and ceiling.




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