WHAT IS A "BUILD TO SUIT"?
A “build to suit” is a type of real estate development wherein a building is constructed to meet the specific requirements of a particular end user. This begins with an undeveloped site and ends with the delivery of a finished product. Key advantages include being able to customize building components and property features to a specific use. This could include everything from aesthetic features to parking and loading configurations. A disadvantage may be the long amount of time required to plan and construct a new commercial building.
During the exploration stage of a potential build to suit, tenant/buyer advisors are critical. Advisement encompasses qualifying the capabilities of the developer and the site. Review of the planned end-product with a market expert is also crucial. Users will want to ensure that the planned project has high long-term functionality relative to the market, especially if considering a purchase of the building.
WHY BUILD TO SUIT?
First, there may not be anything existing readily available that meets the specific needs & requirements of the end user. The user may have fairly straight forward specifications however in a low vacancy market, it is possible that a build to suit may be the only option. However, it is more likely that a build to suit would be advantageous or necessary if the requirement is somewhat outside of the norm; for example – a larger than typical space, above average parking, etc. It is also possible that a build to suit will also open more opportunities to purchase.
WHEN TO START THE PROCESS?
The process of constructing a new office or industrial building can take up to approximately 2 years. Six to nine months of this process can be permitting and planning and another 6 to 9 months in actual construction. Additionally, it may take 6 months or longer to identify an appropriate site and conduct initial due diligence. Working with a real estate agent 1 to 2 years prior to an expected relocation or new facility acquisition assures that all options are available.
HOW DOES THE PROCESS WORK?
Development of commercial property can be complex. There are initial land studies - environmental and geological, as well as interpretation of those studies. There is planning and permitting which is typically a months long process. Then, finally, there is construction. It is best to involve an experienced developer or project manager. This can be done after the identification of a site. The reason behind this is that a site may sometimes go along with a particular developer. If the site ownership is a developer than the site may only be available as a build to suit from that particular entity. In the case that the site is not developer owned, it would be the responsibility of the user and its representation to employ a developer or project manager in conjunction with the site acquisition.
The first step is to engage a commercial real estate advisor that can begin identifying sites. From there, the advisor can engage the appropriate consultants for initial site investigations and negotiate terms of the acquisition. At SRE, we will guide your organization throughout the process, from site exploration through the construction of the project and final occupancy.