Built-To-Suit

Built-To-Suit refers to a method of commercial leasing in which the landlord or developer constructs a building to the tenant’s specifications.

In a built-to-suit arrangement, a tenant will generally have significant input into the design, layout, and finishes of the building, as the property is intended to suit their specific business needs. These can range from the architectural style and interior layout to specific technology or infrastructure requirements.

The lease terms are usually long-term, and the landlord or developer assumes the risk of the construction process. The developer is responsible for securing the land, obtaining necessary permissions and approvals, sourcing the financing, and handling the construction process.

This approach is commonly used in commercial real estate where the requirements of tenants are unique and hard to meet with standard off-the-shelf property. Examples include restaurants, healthcare facilities, data centers, and large corporate offices.

After completion, the tenant typically pays a higher rent to cover the cost of the agreed-upon construction. The advantage for the tenant is that they get a building perfectly tailored to their business, without the large upfront capital cost and risk associated with constructing their own premises. The landlord, on the other hand, secures a long-term tenant and a steady stream of income.