Build-to-Suit vs. Build-Out: Which Model is Better for Your Business?
Tenants work with landlords all the time to determine how the landlord’s space can best fit their business requirements, but the process of determining how much input a tenant wants to have is crucial for the development of a space. To determine this, we will examine the benefits and drawbacks of build-to-suit vs. build-out: Which model which model is better for your business?
Build-To-Suit Model: What it is, what it’s best for and what it lacks
What it is: The build-to-suit model is when a space is already mostly build, typically around 80%. For the most part, the space has been built with the landlord’s specifications, but as soon as a tenant signs the lease, they are able to have input into how to finish the space with their specifications.
What it’s best for: simply put, the build-to-suit model allows landlords to have the most amount of control when it comes to the construction of a space but allows tenants the ability to customize the space under lease. This model allows the landlord to work with a contractor and builder that they are comfortable with. After the tenant has signed the lease, the tenant will work with the contractor to decide how to best fit the space to their own needs. This model is good because it allows tenants the ability to customize a space as much as they can while not having to own the space.
What it lacks: the build-to-suit model is a complex model that will take a lot of understanding on both ends. The build-to-suit model requires two letters of agreement from both sides, entails a lot of site-evaluation and discussion, and can be potentially costly for the tenant. This model will require a lot of work on the part of the tenant, so it is not best for a tenant who does not have many specific needs when it comes to their space.
Build-Out Model: What it is, what it’s best for and what it lacks
What it is: The build-out model is when a space has been finished already and may have even been previously occupied by another tenant. With this model, tenants can specify how they want the space customized and work with the landlord to see what is possible. Sometimes, this can include a complete remodel or just general improvements and changes. It is also possible with the build-out model for the tenant, with the agreement of the landlord, to hire their own contractor to do the changes that they desire.
What it’s best for: the build-out model is best for tenants who are looking for a space that can be customized to them but will not have to be completely remodeled. The build-out model will allow for some renovation and classification, but usually should not take too much time and energy for a tenant to get the space that they want. This model is a relatively simple process compared to the build-to-suit model and will result in less work on the part of the tenant.
What it lacks: the build-out model does not allow for the amount of personalization that the build-to-suit model allows. This model will usually require a tenant to hire their own contractor for work done to the space, so depending on whether or not this is something that is desirable to the tenant will determine whether it is a good choice.
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