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Build-to-custom is a long-term lease option where a landlord builds a facility to a tenant’s specifications. Developers advertise this option in real estate publications, and tenants benefit from having a custom facility tailored to their needs. Developers gain a committed tenant, and all parties should review the contract carefully before agreeing.
Build-to-custom is an option in which a landlord agrees to build a facility to the specifications of a prospective tenant, who signs a lease to occupy the property once it is complete. This is a long-term arrangement, as the owner must make a significant investment in the process, and if the building’s custom features are highly unique, it can be difficult to find a replacement tenant. Developers generally offer a build option for commercial space, although some may build schools and other facilities on request.
Developers who offer this lease option typically advertise it in real estate trade publications and magazines. It is common to place a sign in the advertisement that it is available for construction to suit the lease. The tenant can contact the developer to draw up a contract. Once the terms are satisfactory to all involved, the developer can begin construction of the building and turn it over to the tenant for use once it is complete.
For tenants, there are a number of advantages to this type of lease. One is the ability to develop a custom facility to precisely meet needs, with a design tailored to the company’s mission and activities. This can be valuable in the long run, especially when compared to the alternative of trying to make a generic building work. Businesses may find it easier to expand and reconfigure their operations when they have a custom building to work from.
There may be reasons why a business does not want to own property. Real estate can be expensive, and building structures requires a substantial investment that can be difficult to finance. Additionally, the developer retains responsibility for maintenance in many construction contracts to accommodate, allowing the tenant to focus on using the space. Leasing a build to fit the structure may be more expensive, but the benefits could be greater than this.
Developers gain a committed tenant who will maintain occupancy, allowing them to recoup investment costs associated with purchasing the property and building the structure. This can be a significant benefit in regions where tenant turnover tends to be high.
The terms of a custom build agreement can vary considerably. All parties should review the contract carefully and request any necessary changes before agreeing. Contract negotiations generally require legal services to represent the interests of all involved.
Smart Asset.
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