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Build-to-Suit Deals: Unlocking the Benefits for Tenants and Developers

February 5, 2025

Build-to-Suit Deals: Unlocking the Benefits for Tenants and Developers in Commercial Real Estate

In the commercial real estate landscape, build-to-suit (BTS) agreements have proven to be a strategic solution for businesses and developers. By offering custom-built properties that meet a company’s tenant specifications, these deals create long-term lease commitments and beneficial relationships between landlords and tenants. Invest Texas Real Estate specializes in connecting developers with businesses and coordinating the commercial development process at every step.

The Build-to-Suit Process

 

The process of a BTS transaction involves a collaborative effort between a developer (future landlord) and business (future tenant). At Invest Texas Real Estate, we utilize our expertise and connections to ensure a smooth real estate investment from start to finish. Here’s what to expect:

  1. The developer is connected with a potential tenant to discuss the facility size, design, and location needed for property customization.
  2. A contract is drawn up outlining the terms of the deal, including timelines, design, construction, and long-term lease agreement.
  3. Once the design is finalized, project management begins with the developer and tenant in communication throughout the construction process.
  4. The custom-built property is finalized, and the tenant moves in to begin operations and start paying rent.

Benefits of Build-to-Suit Deals

Typical Timeline for Build-to-Suit Deals-2-2

For Buyers (Tenants):

  • Capital Preservation: Tenants can focus on business growth rather than developing real estate.
  • Customization: The new facility will meet their specific needs to optimize their workspace.
  • Long-Term Cost Management: Tenants can negotiate more favorable lease structures that provide long-term financial stability and protection against a changing market.
  • Occupancy: Once construction is complete, tenants move into a fully customized space without the delays of adapting existing properties.
  • Minimized Business Disruption: Businesses can continue operating from their current facilities while their new BTS property is being developed.

For Sellers (Developers/Landlords):

  • Assured Tenancy and Rental Income: BTS agreements come with long-term lease commitments, ensuring immediate occupancy and consistent, predictable revenue.
  • Lower Vacancy Risk: With a tenant in place as soon as construction is complete, the investment property does not sit on the market empty for prolonged periods.
  • Optimized Development: Developers control costs and timelines of construction.
  • Relationship Building: Working closely with tenants fosters strong relationships, leading to repeat tenants, future commercial development projects, or referrals.

Typical Timeline for Build-to-Suit Deals

While timelines can vary, a general breakdown of the commercial real estate development process includes:

  • Location Approval: 1-2 weeks
  • Facility Design and Approval: 2-3 weeks
  • Lease Terms Approval: 1-2 weeks
  • Construction of Custom-Built Property: approximately 5 months
  • Walkthrough and Final Approvals: Upon completion
  • Long-Term Lease Commencement: After final approval

Is a Build-to-Suit Right for My Company?

A BTS agreement could be a strategic real estate investment if you’re an established business that has outgrown its current facility and would benefit from a customized space. Instead of spending your financial resources on commercial real estate, you can partner with an investor that will pay for and develop your space according to your tenant specifications. This way, you can continue operations in your current location while your new facility is being built. A custom-designed property can optimize workflows, reduce costs, and enhance productivity.

What’s the Next Step?

BTS deals are a powerful tool for growth and success in commercial real estate. Whether you’re a business seeking a tailored space with capital preservation benefits or a developer looking to secure stable returns through long-term leases, we can help. These agreements offer significant risk mitigation for both parties, making them an attractive option in the commercial development sector.

Whether you’re a business seeking a tailored space or a developer looking to secure stable returns, we can help. Use the contact form below to get in touch with us!