Building for a Tenant in the Build-to-Suit (BTS) Model

Building for a Tenant in the Build-to-Suit (BTS) Model

Build-to-suit (BTS), or building "to measure", is a model for delivering commercial investments in which a facility is created for a tenant who is known in advance, along with their specific operational requirements. Instead of erecting a universal hall or a building "for the market" and only then looking for a user, the investor or developer designs and builds the property exactly as the future tenant needs it — from the functional layout, through the height and load capacity of the floor, to the parameters of utilities and automation. In this article we explain what BTS is, who it suits, how the process works step by step, what benefits and risks it carries, and why the role of the general contractor is crucial in this model.

What the build-to-suit model is

In the BTS model, the starting point is not a plot of land and a finished design, but the need of a specific business. The tenant defines the requirements — production, warehouse and office space, the number of docks, technical parameters, energy class — and the investor delivers a ready facility on the basis of a long-term lease agreement. This is what distinguishes BTS from speculative construction, where the developer erects a facility without a signed tenant, counting on commercialization during or after the works.

BTS is sometimes confused with the "owner-occupier" model, in which a company builds a facility to own and use itself. The difference is fundamental: in build-to-suit the investor remains the owner, and the tenant uses the facility on the basis of a lease agreement — most often for 7, 10, or even 15 years. As a result, the user obtains space ideally matched to their processes without freezing capital in real estate.

Who BTS is for

The model works wherever the standard space available on the market does not match the specifics of the business, and the leasing horizon is long and predictable. BTS is most often used by:

• Manufacturing companies requiring atypical floor load capacity, hall height, cranes, or technological installations.
• Logistics operators and retail chains needing distribution centers with a defined number of docks and internal road layout.
• Tenants from the refrigeration, food, and pharmaceutical industries, for whom temperature and hygiene parameters are critical.
• Businesses planning expansion or relocation that want predictable leasing costs instead of a capital investment.
• Developers and investors seeking a safe rate of return based on a long-term agreement with a reliable tenant.

How the process works step by step

Delivering a BTS project is a sequence of stages in which business, design, and construction must be bound together by a single responsibility. Below is a typical project flow:

• 1.

  Defining the tenant's requirements and a preliminary functional-use program.

• 2.

  Choosing the location, analyzing the plot's capacity and the development conditions.

• 3.

  Negotiating the lease terms (letter of intent, pre-lease agreement) and the financing model.

• 4.

  Construction and detailed design taking into account individual technical parameters.

• 5.

  Obtaining the building permit and carrying out the works through the general contractor.

• 6.

  Acceptance, obtaining the occupancy permit, and handing the facility over to the tenant.

Benefits of the build-to-suit model

The greatest value of BTS is the precise matching of the facility to the tenant's processes — without the compromises typical of "second-hand" space. The tenant receives a building ready for work from day one, with parameters they would not find on the standard market. The investor, in turn, gains an asset secured by a long-term agreement, which translates into predictable cash flow and a higher property value in the event of a future sale.

• Full matching of the layout and technical parameters to operational needs.
• No freezing of capital on the tenant's side — the cost is spread over the rent.
• Predictable, long-term revenue for the investor and a stable valuation of the asset.
• A modern, energy-efficient facility meeting current standards and ESG requirements.
• The ability to design reserves for the tenant's future expansion and growth.

Risks and how to manage them

BTS is not free of risk and requires conscious management on both sides of the agreement. Because the facility is created for a single user, its alternative use may be limited — which is why the tenant's reliability and the length of the agreement are so important. The most significant areas of risk include rising material costs during construction, delays in obtaining permits, and changes to the tenant's requirements once the works have already begun.

These risks can be mitigated through a solid budget with a contingency reserve, an agreement with provisions on price indexation and deadline guarantees, and above all through the choice of an experienced general contractor who will take responsibility for the cost and deadline of the entire undertaking.

The role of the general contractor

In the BTS model, the general contractor is the glue of the entire project. It is the contractor who translates the tenant's business requirements into concrete technical solutions, coordinates designers and subcontractors, keeps an eye on the budget and schedule, and is responsible for the quality of acceptances. A good general contractor gets involved as early as the concept stage — their knowledge of costs and technology helps to avoid solutions that look good on paper but inflate the budget or extend the delivery.

The "design and build" formula, in which the general contractor is responsible for both the design and the construction, is increasingly used. For the investor this means a single point of responsibility, a shorter schedule, and a lower risk of disputes at the interface between design and execution — which, in BTS, where the deadline for handing the facility over to the tenant matters, is of particular importance.

Summary