When you sign a lease for commercial space in Saudi Arabia, one of the most consequential decisions you will make is the form of the fit-out contract. The two dominant models — shell-and-core and turnkey — have fundamentally different implications for cost structure, design control, timeline, risk allocation, and what happens at lease end. Getting this decision right before you sign the lease can save millions of riyals and months of programme time. Getting it wrong can lock you into an arrangement that constrains your business for the duration of the tenancy.
This guide provides a comprehensive comparison of both models in the Saudi Arabian commercial context, with worked cost examples, risk matrices, and a clear framework for making the right choice for your situation.
Definitions
Shell-and-Core
In a shell-and-core arrangement, the developer or landlord delivers the building structure and base-build services — the structural frame, external envelope, main vertical MEP risers (primary electrical distribution, main HVAC plant, fire suppression mains, and lift shafts) — but leaves the individual floors or tenanted areas as unfinished space. The tenant receives:
- Bare concrete floor slab
- Exposed concrete or structural ceiling (no suspended ceiling)
- Unfinished perimeter walls (structural only)
- Primary services terminated at a distribution point on the floor plate — not distributed within the tenanted area
- No internal partitioning, no lighting, no secondary HVAC distribution, no floor finishes, no joinery
The tenant is fully responsible for fitting out the space to their operational standard.
Turnkey (Fitted Out)
In a turnkey arrangement, the developer delivers a fully finished space — ready for immediate occupation. The fit-out specification is agreed between landlord and tenant (or is a developer standard), and the completed space includes flooring, ceiling, lighting, partitions, secondary HVAC distribution, electrical distribution to sockets, data infrastructure, fire alarm to the floor, and often furniture and AV equipment.
Category A and Category B
A third model — increasingly common in Grade A office markets in Riyadh — sits between these two. Category A delivery includes a suspended ceiling, raised floor, mechanical and electrical distribution to the floor plate (not to individual workstations), and basic lighting. The tenant then completes the Category B fit-out: partitions, custom lighting, joinery, flooring overlay, data and communications, and branding. This model is effectively a developer-paid “base fit-out” with tenant-paid “customisation.”
Where Each Model Is Standard in Saudi Arabia
| Building Type | Typical Delivery Standard | Examples in Riyadh |
|---|---|---|
| Grade A commercial tower (large floor plates) | Shell-and-core or Category A | King Abdullah Financial District (KAFD), King Fahad Road towers |
| Grade B commercial office (mid-market) | Category A or partial fit-out | Olaya Street, Al Malqa, Hittin |
| Serviced office / co-working | Full turnkey (operator fit-out) | WeWork, Regus, local operators across Riyadh |
| Retail mall unit | Shell (structure and services stub-ins only) | Mall of Arabia, Riyadh Park, Al Nakheel Mall |
| Strata-titled office (for purchase) | Varies — confirm with developer | Various |
| Government / semi-government premises | Often shell-and-core; fit-out via separate government tender | Various |
Cost Comparison
Cost comparison between the two models requires looking beyond the headline rent to the total occupancy cost over the lease term.
Fit-Out Cost Benchmarks (Shell-and-Core, Tenant-Funded)
| Specification Level | Fit-Out Cost (SAR/sqm) | 1,000 sqm Office Total | Typical Occupant Type |
|---|---|---|---|
| Economy (basic partition, standard finishes) | SAR 800–1,200 | SAR 800K–1.2M | Back-office, support functions |
| Mid-range (good quality; standard corporate) | SAR 1,200–2,000 | SAR 1.2M–2.0M | Professional services, corporate tenants |
| Premium (high specification; branded environment) | SAR 2,000–3,500 | SAR 2.0M–3.5M | Financial services, technology, international firms |
| Flagship / HQ (bespoke, imported materials) | SAR 3,500–6,000+ | SAR 3.5M–6.0M+ | Multinational HQs, C-suite floors |
Rent Premium for Turnkey vs Shell-and-Core
Turnkey or Category A spaces in Riyadh carry a rent premium over equivalent shell-and-core. The premium reflects the developer’s cost of completing the base fit-out amortised into the lease. Typical premiums in the current market:
| Delivery Standard | Indicative Annual Rent Premium vs Shell-and-Core (per sqm) | Payback Period (vs mid-range fit-out cost) |
|---|---|---|
| Category A | SAR 100–200/sqm/year | 4–8 years |
| Full turnkey (standard) | SAR 200–400/sqm/year | 3–7 years |
| Full turnkey (premium) | SAR 350–600/sqm/year | 4–8 years |
For a 1,000 sqm tenant on a 5-year lease, a SAR 300/sqm annual premium totals SAR 1.5 million in additional rent — equivalent to a mid-range shell-and-core fit-out. If the turnkey specification is acceptable to your business, and you need speed to occupation, the turnkey premium may be worth paying for a short lease. For a long lease (5+ years) where the fit-out is genuinely yours to design, shell-and-core almost always delivers better value.
Design Control and Customisation
| Attribute | Shell-and-Core | Category A | Full Turnkey |
|---|---|---|---|
| Layout freedom | Complete (within structural limits) | High (partition layout only) | Low (developer’s standard) |
| MEP customisation | Full — design your own distribution | Secondary distribution only | Very limited |
| Brand expression | Complete — design from scratch | Joinery and finishes only | Signage and branding overlay only |
| Technology infrastructure | Full control — design to your spec | Data to floor plates; tenant distributes | Developer standard; upgrades costly |
| Future flexibility | High — you own the fit-out, can modify it | Medium | Low — modifications trigger reinstatement obligations |
Risk Comparison
| Risk Category | Shell-and-Core (Tenant Risk) | Full Turnkey (Developer Risk) |
|---|---|---|
| Construction cost overrun | Tenant bears — budget discipline critical | Developer bears (within agreed spec) |
| Programme delay | Tenant bears — affects move-in date | Developer bears (subject to contract terms) |
| Specification quality | Tenant controls — risk of own specification errors | Developer risk — turnkey disputes common over finish quality |
| Contractor performance | Tenant’s risk — depends on contractor selection | Developer’s risk |
| Authority approvals | Tenant manages (with contractor) | Developer manages |
| Reinstatement at lease end | Tenant responsible for removing tenant’s fit-out | Often less onerous — agree terms at lease signing |
| Obsolescence | Tenant’s fit-out becomes obsolete on their timeline | Developer’s standard specification may date faster |
Which Model Is Right for You?
| Scenario | Recommended Model | Reason |
|---|---|---|
| Long lease (5+ years), large space, strong brand identity | Shell-and-core | Design control and long-term value outweigh upfront cost |
| Short lease (1–3 years), standardised operation | Full turnkey or serviced office | Speed and capital preservation; fit-out investment not recovered in short lease |
| Rapid occupation required (<8 weeks) | Full turnkey or serviced office | Shell-and-core fit-out cannot be delivered in 8 weeks at any scale |
| Specific operational requirements (lab, trading, specialist) | Shell-and-core | Turnkey cannot accommodate specialist requirements without costly bespoke changes |
| Capital-constrained; cashflow priority | Full turnkey or Category A | Preserves capital; fit-out cost absorbed in rent |
| Mid-size space, medium lease, standard office programme | Category A | Base infrastructure provided; tenant customises at modest cost |
Key Contractual Points to Negotiate
Regardless of which model you choose, these are the contractual terms that matter most:
- Reinstatement obligations: What must you remove or restore at lease end? For shell-and-core, ensure your lease specifies exactly what reinstatement is required — and what is not. In some Riyadh commercial leases, tenants are required to strip the entire fit-out; in others, certain elements may be left. Clarity here avoids a significant dispute at lease end.
- Fit-out contribution (for turnkey): Many landlords in Riyadh’s Grade A market offer a fit-out contribution (sometimes called an incentive or tenant improvement allowance) to attract quality tenants. This is a lump sum paid by the landlord toward the tenant’s fit-out costs. Amounts typically range from SAR 500–1,500 per sqm depending on lease terms and market conditions.
- Fit-out period (rent-free): For shell-and-core, negotiate a rent-free period during which your fit-out is completed. This is standard practice in Riyadh’s commercial market. Typical rent-free periods range from 2 to 6 months depending on space size and lease length.
- Specification for turnkey: If taking a turnkey space, ensure the specification is attached to the lease as a schedule and that a delivery standard inspection is conducted before you accept handover. Turnkey disputes most commonly arise over specification substitutions and finish quality — documentation is your protection.
Dar Anan delivers both shell-and-core fit-outs and Category B customisation of Category A spaces across Riyadh. Our team can review your lease terms and advise on the model that best suits your operational and financial requirements. Contact us to discuss your project.