Learning More About Real Estate

What Every Business Owner Should Understand About Build-To-Suit Leases

25 July 2016 by Nathan Olson

When you're in the market for commercial real estate, one of the things you should consider is the possibility of a build-to-suit lease. After all, if you're just looking at the properties that are being leased as-is, you're stuck with the floor plan that's already in place. If you can work with a commercial real estate company that also offers build-to-suit properties, you can have the building constructed to meet your needs specifically. Here are a few things you should know about build-to-suit properties.

Many Factors Affect The Cost

The cost of build-to-suit properties can be affected by many different factors that you wouldn't have to consider for an as-is lease.

• Your company's credit rating is a significant factor. Companies offering build-to-suit properties are looking for companies that are more likely to be in it for the long haul. That means companies with an investment-level credit rating. The credit rating is an important consideration for long-term lease agreements because the lessor wants to be sure that you are reliable.

• The lease term can also affect the rate. Since the property will be constructed according to your needs, you'll have to pay a higher lease rate if you only agree to a shorter term. This higher rate is intended to help the lessor recoup their investment over the initial lease term. If you agree to a longer term instead, you can often negotiate a lower rate since the construction costs can be amortized over a longer period.

• Location is also important. Remember that if you choose not to renew the lease, the lessor will still need to be able to find another tenant for the property. That means a build-to-suit property that's not in a main traffic area is likely to have a higher lease payment than one that's just off a heavily traveled road.

There Are A Variety Of Lease Options

A commercial property with a build-to-suit lease has many different lease term options. Here are a few to consider.

• A full service lease includes all of your overhead expenses as part of your lease. This means you won't have to worry about budgeting additional funds for the utilities and maintenance costs.

• A triple net lease saves you from having to cover construction costs and building maintenance. You will, however, have to pay for the operating costs and building taxes.

Build-to-suit commercial properties are a great investment if you have unique needs in your space. With this information and the help of a commercial real estate agent, you can find the lease agreement that works well for your situation.

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