What is a Build-to-Suit lease?
Build-to-Suit Leases (aka. Design-Build) are those in which companies select a real estate partner to design and execute the building of a workspace tailored specifically to their operations, requirements and vision. In exchange, the firm accepts a long term tenancy agreement following the completion of the building.
Consequently, the developer plays the role of the ‘Landlord’, while the client is the ‘Tenant’. Unlike traditional leases, the relationship of Landlord and Tenant extends beyond the norm. This is because both require to work in tandem from the get-go. There are pros and cons to such a project-delivery method. Let’s consider some of them.
The advantages of a build-to-suit contract
Clients are involved in all stages of the development process from choosing the location, to formulating design requirements. They can ensure that unconventional spaces, specific to their needs, are incorporated.
With modern businesses trying to break away from mundane offices, ‘Build-to-Suit’s aid the effort to cultivate unique brand identities and fun, smartly fitted environments. Developers can capitalize on space-efficiency, while employees can enjoy working in offices crafted especially for their needs. The result being decreased absenteeism and greater productivity.
Developers also gain by circumventing the costly process of marketing their existing properties. Instead, they can focus their resources on providing all-inclusive solutions to the tenant they’ve already secured. From concepts and permissions required, to value engineering, space planning, technical drawings, costing and construction; they provide a one-stop-shop for all project considerations.
Businesses engaged with Build-to-Suit contracts can avoid the risks involved in property acquisition and construction. They retain the ability to invest their saved capital into their own development.
Why Built-to-Suit workspaces are not for everyone
A large investment of time and effort in a Design-Build contract, makes it viable only for clients looking for long-term leases. These workspaces are undoubtedly more expensive than simply finding an empty space and renting it. However, if businesses have the financial bandwidth to invest in tailor-made offices which support smooth expansion, the gains are visible in other avenues like increased efficiency and lower logistical costs.
Clients may have a fixed, non-negotiable move-in date. Once construction commences, developers have to keep things on schedule. A difficult task, if unforeseen circumstances occur or there is any miscommunication. Build-to-Suit contracts may retain a clause allowing the client to exit the contract if the schedules are not adhered to. However, lost time and resources is a price both parties could suffer.
As the construction industry evolves, ‘Build-to-Suit’ is its comprehensive solution to businesses that want to invest in development, as much as brand image. By involving clients in the design process, developers can create spaces that are a truthful reflection of the business’ values and vision. A careful evaluation of personal timelines, financial ability and rate of growth of your business should make it clear if a Build-to-Suit Lease is what you need!