Efficiency. Customization. Quality. You probably want all of these things in your ideal commercial space.
And you can achieve those in a number of ways. From leasing existing space to redeveloping an older property.
There are advantages and disadvantages to every decision, but there may be no better way to bring your vision to life than to develop a build to suit (BTS).
But there are a few important considerations to remember when choosing the BTS route and knowing if it’s right for you. Let’s take a look at five of them.
Is the configuration, space, design, and personalization so specialized that a new build is the most practical option?
In today’s market, where consumers want a personalized experience, there’s no better way to do that than by tailoring your requirements to meet their demands. If you're a tenant looking to portray your brand through design and is looking to maximize space, efficiency, and experience then a build to suit may be the best option when expanding.
Do your specifications/requirements make it too difficult, inefficient, and lengthy to find a suitable space to rent?
When your needs are specific, trying to find an existing space to meet those can be time-consuming and can leave you disappointed. Take for example an area like Phoenix, where 2017 ended with its strongest quarter of net absorption in 5 years, driving vacancy rates lower, yet the central business district has the 5th highest total of vacant land in the country.
Are you prepared for a long-term commitment?
For the most part, build to suit leases have long terms, often 10 to 20 years or longer. With that in mind, you must be willing to accept the typical lease structure of a build to suit. If a project is more specialized, it may become more important for the lease term to be longer in order to fully amortize the landlord’s investment in the property. Additionally, you have to factor for the time commitment towards due diligence, acquiring, designing, and building your facility.
Is your business in appropriate credit standing?
Generally, companies that are able to do build to suits have proven financial track records and are quite stable, making them investment grade tenants, or rated slightly below investment grade. The appropriate specifications and costs are typically determined by your credit quality. Therefore, better credit standing will result in a more practical, feasible project.
Are you willing and able to conform to project budget and rent?
Rent is always a key concern. Tenants typically favor certainty and want to know what the rent will be. But a commercial developer can’t agree to a fixed rent until all project costs have been determined. This can’t be done until the land is selected, the building has been designed and priced, and site improvement and infrastructure costs have been determined.
Build to suit development provides unique advantages to those that choose these type of projects. And if you're a business with a specialized plan, prepared for a long-term commitment, and can handle the financial costs, then build to suit may be right for you.