Second Generation Space
Previously occupied commercial space that comes with an existing buildout from the prior tenant.
Definition
Second generation space (second-gen or 2nd gen) refers to units that have been occupied before and retain some or all of the previous tenant's improvements. This contrasts with vanilla shell in new construction. Second-gen space can be advantageous when the existing buildout matches a new tenant's needs—they move in faster and cheaper. However, it can also be a liability if the buildout is dated, damaged, or poorly configured, requiring demolition and reconstruction. Landlords pricing second-gen space must weigh the value of existing improvements against the cost to reposition if needed. In small bay industrial, common inherited buildouts include front offices, restrooms, and specialized electrical or plumbing.
Example
A 3,000 SF second-gen unit previously housed a plumbing contractor. The buildout includes a 400 SF front office, restroom, and floor drains in the warehouse. An electrical contractor touring the space likes the office but doesn't need the floor drains. The landlord offers it at $12/SF—slightly below market for vanilla shell—since the buildout is functional but not ideal.