What is Built to Suit Property?

Businesses have three options when it comes to expanding into a new facility– they can invest in land and then can construct on their own, lease or purchase an existing facility and make necessary renovations, or partner with a developer to design and build a new facility for lease.

A landowner has land, and some company or commercial real estate agent approached the landowner and said that we are ready to take property on a lease if you can build it as per our requirement. Then land owner constructs the property as per the client’s specific requirement and handover to him, this is called built-to-suit property. Built-to-suit properties are generally business-specific because they cater to one single type of business.

A built-to-suit property is a type of property wherein there is an agreement between the landowner and the tenant and the property space is customized according to the client’s requirements by the landowner. The landowner shares all the design and construction requirements at the outset, which when agreed upon, the actual property construction commences.

BTS properties are very flexible in terms of:

• Location– Facilities can be developed within the developer’s land or the client’s real estate. The most advanced formula of BTS is projects executed based on the purchase of land, which is accepted by the client in terms of conducting business activity.
• Size of land/space– Depends on the client’s operating needs;
• Type of cooperation– The possibilities are either to lease or construct in order to sell the investment to a client;
• Purpose of BTS facility– Property-sorting plant, Automobile showroom, light production, heavy production, which takes place on the real estate that is to be the object of the investment.

Advantages of Built to Suit Property

1. Choice of convenient location and investment to the tenant.
2. Savings in terms of investment and operating costs to tenants.
3. The design of the building will be tailored to the exact needs of the tenant with existing needs and future growth options in mind.
4. The developer or landowner is assured of tenancy even before the construction and this gives him confidence and financial security.
5. BTS – Built to suit properties is the lowest risk possible property investment.
6. Rentals start from day 1 which is an ideal scenario for a real estate investor. 

Disadvantages of the BTS Model

1. Property is specifically made as per client requirements so the developer will find difficulty in the future to find another tenant easily.
2. The overall timeframe of a BTS can reach out as far as 15-24 months, or longer in some cases, and market conditions change rapidly.
3. Tenants may view long-term lease deals as a drawback if adequate growth and contraction options aren’t available.
4. New construction is expensive. BTS construction is no exception; you just pay for it at a higher lease rate.

Why do companies choose built-to-suit property?

At present, businesses do not want to engage capital in buying a plot and constructing a building and decide to utilize BTS in order to economize on the investment and future maintenance costs. In the BTS model companies get construction specifications as per their own requirement so this is the biggest advantage.

Few reasons why companies are choosing the BTS model.

1. Lack of availability of the good ready-to-move-in property.
2. Company is looking for their specific requirement, few companies require bigger open area, and few require a more constructed area

What is The operating structure of BTS Properties?

The tenant prepares the specifications for the development and the developer or landowner develops the property as per the tenant’s specifications. The tenant then enters into a long-term lease on the property and the investor receives rental payments from the occupier. “The complete time taken in this process is 9-12 months, it may vary as per the specification and size.

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How to get a good tenant for a Built to suit Property?

The use of the right property consultant to guide you through this in the simplest and easiest way to find the right client. You can find good industrial consultants area-wise on IndustrialPlot.com.

There is no use in re-inventing the wheel and wasting time searching for a client. Companies already have consultants who assist them in this process. You can post your property on IndustrialPlot.com with complete details; from here you can get good leads directly from companies and from property consultants also, as Industrialplot.com is the only Industrial real estate platform which is specifically dealing in Industrial real estate