Build-to-suit is where a developer constructs a building according to a tenant's specification and agrees to lease the building on pre-agreed terms and rent upon completion.
The decision on whether to buy land and build or rent either an existing building or a build-to-suit is driven by many factors including a company's attitude to owning real estate. For some foreign companies, owning is not an option if the desired location is outside of an industrial estate because of restrictions on foreign ownership of land.
If a decision is made to rent, then the choice is whether to rent an existing building or look at a build-to-suit option.
The decision is normally driven by whether the specifications of available buildings match the requirements of the user.
The major developers of Modern Logistics buildings for rent such as TPARK or WHA have buildings in a range of locations.
The standard specification is generally a size of up to 30,000 square metres (divisible into smaller units) with a floor load of 3 - 5 tons per square metre and a clear height of 10 - 12 metres with loading docks at a ratio of one dock for every 1,000 square metres, and dock levellers at a ratio of one dock leveller for every 2,500 square metres.
For some users these specifications do not match their requirements. They may need a larger area, heavier floor load, greater clear height, enhanced M&E specification, a specific shape or loading docks in specific positions. In this case, the option is to find a build-to-suit developer.
There are now more developers who are interested in this type of investment and the key to success for a user is to follow a disciplined process to get both the best product and the best terms. It should be noted that a build-to-suit lease is normally required to be for 10 years or more due to the developer's investment in the occupier's specific requirements.
"The first step is to decide on a clear set of requirements. This will include location, accessibility, and avoidance of truck restrictions, land size and shape. This would be similar to setting the requirement to find an existing building. The key difference is the next step which is to produce a very detailed specification similar to that which would be provided to a contractor if the user wanted to construct their own building," said Mr. Adam Bell, Head of Industrial & Logistics Services at CBRE Thailand.
The specification is critical and must be as detailed as possible so that the user both gets what he wants and that all potential landlords are basing their rental quotes on the same specification.
"To get the best financial terms for the best quality building, the user needs a real estate adviser and project manager at the beginning of the process," added Adam.
The growth in the number of developers means that users can get better deals, but in order to effectively evaluate all offers, they need to be confident that they are comparing similar quality buildings.