Build to suit???

Build to suit???

Contractor · Pittsburgh, PA · Member since 2013 · 143 posts · 36 votes

Trying to gather some information on this...I have recently purchased a commercial building that I was going to conform into another small indoor facility.  It is a 3 story building built on a hill side.  The main entrance (top floor) in the most accessible, and is also where most of the units are now.  The 1st and 2nd floor are really only accessible by an outdoor staircase running down aside the building.  My partners and I had the intention of keeping the 1st floor our office and extra storage for our masonry business equipment. 

The middle floor is fully laid out for some kind of office (dentist, chiro, professional, whatever).  I want to advertise this for office space, but was wondering if anyone has advertised build to suit?  Does that mean I, as the landlord does the rennovations for them, or does It mean they do the work?  I am also wondering if renting to a business, is it standard for them to pay utilities (I am used to residential)??  Any feed back would be appreciated, as well as what you thought about renting to a business..

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  • Glendale, CA · Member since 2013 · 303 posts · 67 votes
    11y

    It's better the tenant does the work, less liability for you, less headaches. If you want to offer TI, Tenant Improvements, one thing you can do is discount their base rent. Yes, it's standard they pay utilities. Commercial utility costs can be enormous. If it's not separately metered, I'd invest in a "Sub-meter"

  • Property Manager · Canton, MI · Member since 2013 · 77 posts · 23 votes
    11y

    If you do a build to suite, do the work for them, or give them a TI allowance. Discounting the rent will impact your NOI and will reduce the value of the building.

    TI costs fall below the NOI.

    One advantage of doing the buildout for them is you know it is done correctly. A tenant that does their own buildout can unknowingly create a (potentially large) liability for you.

  • Contractor · Pittsburgh, PA · Member since 2013 · 143 posts · 36 votes
    11y

    Exactly, see that is what I was afraid of happening.. The tenants that I get in there, if their contractor does things incorrectly or worse, they attempt to do things on their own, I do not want to have to correct the problems they created.  This will make double work for me and loss of rents..

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