What do McDonald’s, Starbucks, Olive Garden, Dollar General, and Olive Garden all have in common? It doesn’t take more than a second to recognize each one’s brand as you drive past it.
Their external and internal construction each have a distinctive design. And these Fortune 500 corporations don’t only achieve this by renovating an existing, outdated structure.
If you’re a tenant wishing to increase your footprint, you can either rent an existing facility and modify it, or you can have a building built just for you.
The maximum level of customization is available with a build to suit development, allowing the tenant to obtain the exact brand-compliant consistency they need. The build to suit tenant signs the build to suit lease, and the owner/developer builds the building to those specifications.
Here are a few more benefits for tenants to choose this option in addition to the complete customization.
Flexibility
Working with a developer results in a more individualized strategy designed to satisfy your particular needs. Additionally, because change is inevitable, particularly in thriving businesses, the tenant has the freedom to relocate without worrying about having to put the property up for sale.
Concept modifications, outgrowing the square footage with more personnel, exceeding business growth estimates, business model changes, and demographic changes in the area are some frequent situations that may need a reevaluation of your space.
Conclusion: Although build-to-suit leases are typically lengthy contracts, they are not as illiquid as true real estate ownership.
Risk Mitigation
When a tenant contacts a developer with the criteria it requires, the developer takes on full responsibility for finding the ideal location, buying the land, and building the structure. After that, it is leased back to the tenant, relieving the business owner of the risk.
Conclusion: Companies of all sizes frequently take this option because there is no chance of having to pay for cost overruns as such would be the developer’s responsibility.
Tax Deductions
The benefit of this sort of lease agreement is that the lessee can deduct the rent payment from their yearly taxes. On the subject of taxes, it’s critical to comprehend the different build-to-suit lease kinds because they may have an impact on the total amount of property taxes you can be liable for.
In conclusion, all rent payments made by the tenant are tax deductible.
Capital Preservation
Build to suits are available to enable tenants keep their capital for other uses because investing in real estate is not everyone’s area of competence or aim. Businesses of all sizes frequently decide that it makes more sense to invest in their firm, which is what they do best.
Conclusion: The bottom line is that build to suit leases let you save money or reinvest it in your company’s activities.
Higher Return Rate
The rate of return on money invested properly in business operations, and expansion typically outperforms the rate of return on real estate investments. Real estate investments often yield single-digit returns, whereas company investments typically yield double-digit returns. Again, because you’re leasing, you have more money to put into your company and get better returns.
Conclusion: Leasing makes more sense if you’re opening facilities with ROIs of 20 to 40 percent. It enables you to develop and benefit from the market.
Keep in mind these additional tenant benefits that come with build to suit leases in addition to the benefits of brand awareness, consistency, and personalization.
Summary
Build to suit development allows the tenant to achieve brand-compliant uniformity. The owner/developer builds a building to the tenant’s standards. Other tenant benefits of build to suit leases include brand awareness, consistency, and personalization. Read more for additional benefits.
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