In commercial real estate, a tenant’s needs depend on his or her industry.  As a broker, meeting a tenant’s needs can help you obtain future tenants that can create diversity in your commercial real estate portfolio. There are two ways to help meet a tenant’s needs in commercial real estate: build-to-suit or build-out.

Build-to-Suit vs. Build-Out: What is the Difference?

  • Build-to-Suit: This happens when commercial space is under construction or about 80% done. Once the tenant has signed a lease on the space, the contractor will work with them to finish the space according to their needs.
  • Build -Out: This happens when the space is already finished and may have been previously occupied by another tenant. The landlord may agree to remodel the unit according to the needs of the tenant. This might include general improvements to the space or a complete remodel. Sometimes, the tenant employs their own contractor to do the work under an agreement with the landlord.

How to Help a Tenant Choose Which Option is Right for their Space:
If your commercial property is a new build, then you’ll likely be finishing the units as build-to-suit for your new tenants. If you have an existing property, then you will probably negotiate a build-out agreement with the new tenant about what improvements you’ll make before they move in and what improvements they’ll be allowed to do themselves.

Final Thoughts:  Negotiate the Terms of a Building Agreement Carefully
Whether you are doing a build-to-suit or a build-out, it’s important that you negotiate the terms of your agreement with your tenants carefully. Working with an experienced commercial real estate team is an important step! Contact Lee & Associates Orange today! Our team can help you determine the right tenants for your property and ensure you are meeting their needs for a lasting long-term partnership. Call us today or contact us through our website!

by Staff Writer, Lee & Associates Orange