Build-to-suit real estate is a unique opportunity for organizations to customize their workspace. The build-to-suit process involves developing a new facility or renovating an existing one to meet the specific needs of a company. This project is usually completed by a property owner and results in a lengthier lease of 10-20 years. When starting a build-to-suit project, there are several key points to keep in mind to create the best possible space.
1. Site selection: The initial step in the process is to identify a suitable site for the facility. The first thing companies focus on are components such as location, accessibility, zoning, workforce, and environmental factors. Within the past few years, companies have also started to focus on factors that affect the workforce, such as education, work life balance, and tax incentives. The final step in the site selection process is a feasibility study. A feasibility study is conducted to determine if the site is going to aid or damage the project. The feasibility study helps companies to draw out the general plan and see where issues may occur and how they can address them upfront. At America Place we work with our clients to help vet this process and reduce risk during the site selection.
2. Financing: Financing is often a key consideration in any build-to-suit project due to the scope. Financing may involve obtaining a construction loan or working with investors to raise capital for the project. Site readiness, the magnitude of the work, and material costs can all factor into a budget and how much financing is needed. Depending on the property owner, financing may not be needed. At America Place, financing from the client is not needed as America Place will handle the development of the building due to the status of ownership.
3. Lease negotiations: Lease negotiations can be completed at different steps during the build-to-suit process. Sometimes lease negotiations happen upfront after the basic plans are made so that the construction costs can be included. Other times, lease negotiations between the tenant and property owner happen after the building has been completed. Negotiations will involve discussing issues such as rent, length of lease, and any contingencies, such as termination clauses or options to renew. Leases can vary from state to state, and no two leases are ever the same. It is important to understand lease language and communicate clearly so both parties understand what the other needs and wants. America Place prefers to work through lease negotiations with the tenant as early as possible. We want to make sure that each side is aware of expectations and obligations before construction begins.
4. Design and permitting: The next steps are to design the facility and obtain any necessary permits. America Place works to collaborate with trusted architects, engineers, and other professionals to develop plans and specifications for the facility. It is important to work with experienced and reputable professionals in order to ensure that the project is completed on time, within budget, and to the desired specifications. This phase is where you get to decide exactly what will make the building unique and compatible for your company. Examples of personalization include things like color schemes, office sizes, column sizing, dock doors, parking, etc. Our Operations and Development Manager works directly with necessary professionals to make sure that the client’s needs can be met as well as are functional with the layout and design of the building. The Operations and Development Manager keeps the contractors on time and completes all necessary paperwork for the state and local permitting.
5. Construction: Once the design and permitting are complete, construction can begin. This can involve a range of activities, including site preparation, foundation work, the construction of the building itself, and landscaping. America Place will lead this for our tenants and keep you up to date on the progress of the construction.
6. Move-in and occupancy: If the lease has been signed and construction is complete, the tenant can move into the facility and begin operating their business.
7. Flexibility and scalability: Build-to-suit projects can be flexible in terms of design and scalability, which allows the tenant to expand or downsize as their business needs change. With today’s economy and current events, like Covid-19, flexibility is key to keeping businesses afloat.
8. Cost-effective: Build-to-suit projects can be cost-effective due to their long term. A tenant is able to occupy a facility that is perfectly suited to their needs, rather than paying for space that cannot help them perform their daily operations. There are several tax incentives the State of Indiana can distribute as well as local programming in River Ridge for companies to bring business to the area, such as the Urban Enterprise Zone Program (UEZ).
9. Long-term commitment: Build-to-suit projects typically involve a long-term commitment from both the tenant and the property owner. This can be beneficial for both parties, as it allows for a stable and predictable price that is built into the long lease, protecting both parties from the swings of the market and inflation.
10. Risk management: Build-to-suit projects involve a variety of risks, to include construction risks, financial risks, and leasing risks. It is important to have a risk management plan in place to mitigate these risks and ensure the successful completion of the project. Having a plan and development partner in place is the key to success.
Build-to-suit operations can be complicated, and they require careful planning, communication, and time. With the complexity of such projects, it is wise to choose a team of professionals who have experience with build-to-suit. America Place is proud to be a developer and property owner in Southern Indiana with the experience to make build-to-suit projects successful. Our PharmaCord Project in River Ridge is a great example of how we can make your dream build-to-suit project a reality.
During COVID-19, PharmaCord outgrew the office space they were utilizing. They were looking for an office that was big enough to support their staff while also catering to their specific needs. They wanted space to grow, outside areas for staff to enjoy their lunches and take walks, as well as several meeting locations within the building to host clients and events. America Place was happy to work with this client to make sure all of their needs were met. The build-to-suit gave them the ability to triple their office square footage, design parking lots for maximum space, and include large conference rooms on every floor that are connected to kitchen areas for hosting. It also gave them the ability to have additional outside space for morning and afternoon walks as well as future building development down the line. America Place was happy to fulfill this client’s wishes and is excited for the next build-to-suit project in River Ridge.
America Place has 85 acres of prime real estate ready to develop in River Ridge. Located on International Drive, this is the perfect site for office or industrial warehouse space.
References:
“Tenants Guide to Build to suit leases in Commercial Property”
Last modified December 27, 2021
Tenants Guide to Build to suit leases in Commercial Property - Austin Tenant Advisors
