Just like you have options when finding a place to live, the same is true when finding a home for your business. For example, you can lease space in an existing building; buy a building and renovate it to fit your needs; or buy land and build your own offices from scratch. But, there’s also a fourth option: Build-to-suit.
In this case, instead of assuming all of the risk that comes along with developing your own property — which is extremely capital-intensive — build-to-suit leasing transfers much of that risk onto a developer who builds the property and then leases it to you. Therefore, this option is often appealing because you can get everything you want in a space custom built for your business — without having to foot the bill yourself for construction, approvals and everything else that goes along with it.
Alternatively, leasing — just like renting — is a much quicker process than build-to-suit. That’s because finding a space and signing a lease can be done in a matter of months, whereas a build-to-suit project can take up to two years to complete (and sometimes more). Additionally, once the build-to-suit project is completed, lease terms are usually significantly longer than normal leases because of the custom nature of the building.
There’s Nothing Like That New Office Smell
If you have the time to commit to it, build-to-suit carries many benefits and freedoms. For example, you can choose the location of the property; the size and shape of it; and materials and colors that match your company’s brand and style. Plus, because it’s a new building, you can also get state-of-the-art building systems — like HVAC, electrical, lighting and plumbing — many of which will be much more energy-efficient than older buildings on the market.
Notably, this option is also more expensive than the traditional leasing of space — at least up front. For this reason, an excellent credit rating is necessary to fund the project. However, much of these extra costs end up being worthwhile through savings in efficiency and reduced operating costs, while also bolstering brand image at the same time.
The Process Begins
Next, similar to any other construction project, developers send proposals to the future tenant (you). Then, after a builder is selected, negotiations begin. Note that negotiations can be one of the more time-consuming stages of the process because both you and the developer have a say in the project: You want a custom and unique space that reflects your brand, while the developer wants a space that isn’t so unique that it couldn’t be reused should you decide to leave after the lease is up. Consequently, every little detail — like design elements, engineering problems, lease documentation, financing and much more — needs to be ironed out in this phase.
Finally, once the negotiations are finished, construction can begin. In many cases, your move-in date will be fixed as it usually coincides with the termination of your current lease. Therefore, timing and time management are crucial during the construction phase. Furthermore, leases will also often have a “walk” clause if delays are too onerous — although these tend to be for specific situations in order to protect the owner from getting stuck with a half-finished custom project. However, in turn, you can also ask for lease clauses that include liquidated damages for completion delays, which motivate the owner to keep the project on schedule.
Once construction is done and the Certificate of Occupancy has been filed, you can move into your brand new, on-brand space. Not many businesses get a space that’s a custom-made, perfect fit for their employees. Enjoy!