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Helping clients make the most of a build-to-suit lease

On Behalf of | Jan 24, 2025 | Commercial Real Estate |

Real estate agents helping commercial clients find business space often have a challenging process ahead of them. Business clients often have very specific needs for the properties they consider. A rental space must meet all of the standards maintained by a franchisor, for example. Those intending to operate manufacturing businesses need space for equipment and facilities with appropriate zoning.

It can take months of research to find properties that fit a client’s needs and align with their budget as well. In some cases, searching for the ideal property can prove nearly impossible. Clients may instead start considering the possibility of a build-to-suit lease. Agents often need to advocate assertively for their clients while negotiating the terms of a build-to-suit lease.

There are risks as well as benefits to bespoke development

In a build-to-suit lease scenario, business tenants can theoretically secure exactly what they need from a space. The landlord can adjust the facilities to meet their needs. However, there are numerous risks inherent in a build-to-suit lease situation. The first is the difficulty in effectively communicating the needs of the clients. People sometimes make assumptions about commercial properties or about the language they use, which can result in unmet expectations and dissatisfaction with the final property.

Even in scenarios where an agent representing a client in a build-to-suit lease negotiation is conscientious about communicating their needs as accurately as possible, there is also the possibility of delays in construction that lead to operational setbacks for the business. A build-to-suit lease might mean that the client has to wait months before they can begin doing business at a location.

If any complications arise during construction, those delays could cause financial hardship or might result in the client defaulting on contracts with outside parties. Build-to-suit leases can also be relatively costly when compared with a lease for a commercial space rented as it stands without requiring any major modifications from the landlord.

In many cases, build-to-suit leases require a long-term commitment from the tenant, which can be risky for those starting new businesses. Real estate agents representing commercial clients often need to educate them about different lease options and help them with the process of negotiating with landlords. In some cases with particularly dense contracts, agents may need help reviewing the documents to ensure that their clients don’t overextend themselves or sign an unfavorable agreement.

Securing assistance while negotiating and reviewing build-to-suit lease terms with a skilled legal team can help agents obtain the best possible outcome for their business clients. With the right approach, build-to-suit leases can be a viable option for those who need specific property conditions to operate a business.

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