What is a Cold Shell?

The term ‘Cold Shell’ is used in the commercial and industrial property environment to define a building or part of a building that is basically the bare structural bones of the construction, where finishes and services have not been installed.

Cold Shells get their name from being just that…Cold! They will have no Heating, Ventilation or Air-Conditioning (HVAC), no floor finishes, partition walls, suspended ceilings, insulation, lighting or plumbing.

It is common however, that connection points for amenities such sewer, gas, and water are in place and some may have fully operational core assets such as elevators, plant rooms, sprinkler systems, or electrical switchboards.

The main advantage to the potential purchaser or occupant is flexibility, allowing a blank canvass for a custom fit-out. The main advantage for the builder or developer is that they can construct the space with minimum cost outlay.

Currently in Melbourne, cold shells are prevalent on ground floor high streets intended to be fitted out as retail, showrooms, or offices, with 2 to 3 levels of domestic apartments above.

If buying new, it’s important that you check the S32 for important documentation regarding formal compliance, the class of building and intended use, associated building permits, and a Certificate of Final Inspection.

It’s good due diligence to get a building inspection also prior to signing any contracts to ensure that the cold shell will in fact deliver the fit-out flexibility you desire. In recent times I have come across significant problems with encroachment of services from apartments above, ceiling heights, and HVAC to name a few. The building inspection should not only check the quality and workmanship of the cold shell but also flag any obstacles you may face with the future fit-out, therefore avoiding costly and binding purchase or leasing mistakes!