Build To Suit: An Opportunity

By
Commercial Real Estate Agent with Northland Real Estate

This is a short recapture of a specialty in commercial real estate, the intent of making it an enjoyable and somewhat informative read.  The presumption that commercial real estate is such a specialized practice is true and false.  While in fact it can be as common and simple as driving a car for those who practice in the field or a difficult as translating a foreign language into readable English.  Thus; Build to Suit; an opportunity for all.

Ingredients of a transaction, a need and a want.  The need is for an asset to meet the present or future needs of an owner, operator, existing business, or new venture to name a few, ultimately to house a business.  This can be a new structure, or a remodeled or converted existing facility. Likewise, the want provides a financially viable entity that is capable of producing, financing, purchasing, building, remodeling, or ...... an existing asset to meet the needs of the party with the need.  A Build to Suit

Risk, real estate carries a certain inherent risk, one that if it can be quantified, is acceptable as offset by return.  Understanding the business, demographic requirements, locations requirements, physical requirements ranging from building configuration, location, lot configuration, traffic considerations, competition and interaction with competition and ancillary uses, employee base, driving time, circles of influence and market areas, and much more help measure the relative risk.  Whether the occupant has a proven concept, a new concept, a tested verse untested concept, branding, financial strength, longevity of product all play into the formula.  Understanding how to conceptually fit all this into a valid business plan that is risk acceptable, financeable and marketable considering that it is always important to have an entry and exit methodology in mind from inception to completion of a concept.   In evaluating potential opportunities it is important to understand that risk and security are value judgments based on beliefs and experiences; one parties success may be another parties failure for the same concept.   Really no different than what works for one owner is a tree covered lot in the hills while another would seek a Desert or oceanfront, all are right.  So, Build to Suit, an opportunity is a result of a meeting of the minds in various senses.

Factors are many and varied in the decision making model and thus the complexity of the build to suit transaction.  Once the parties initially agree the aspect of analysis of the business operation as the potential tenant, concept, financial viability, operational end management factors and longevity.  From the owner/landlord (Lessors)  standpoint, positioning, the realism of the operation and location, highest and best use, financing, cost of acquisition, construction, evaluation of second tier risk if the initial concept is not successful, all reduced to return on and of investment.  

 The final test after the others factors and questions are answered as best as one can is whether the cos of occupancy meets the market and the realistic scope of the market, will it support financing and return on investment, does the business occupant with the stated overhead and anticipated yet realistic volume fall with the acceptable parameters of similar operations in similar locations and markets.

 

Build to Suit: An Opportunity.

 

 

 

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