Built-to-suit Solution of the Future?

In the current context of the crisis, real estate developers are thinking of innovative solutions to ensure their maintenance on the market while limiting their business risk. Some developers, both office and residential (given that demand is declining), came up with the idea of ​​building on demand and according to the needs of a customer. It seemed like an exciting concept, imported from outside: “built-to-suit” (tailor-made).

“The only known element about future development is the location. Starting from the location, you can simulate several real estate products, which will be finalized according to customer requirements.” Explains Irina Petrescu ESOP partner. From the point of view of developers, it is the right solution for this moment. Carrying out a project on request and especially adapted, customized to a company, the risk of remaining with unoccupied spaces is low. Besides, the construction starts after a contract has been signed with the primary tenant of the building.

“It is also how the financing of the project can be obtained more easily. At this moment, those developers who have pre-lease contracts, in the case of office buildings or pre-sale-purchase contracts, in the case of residential projects, have the advantage of obtaining credit for project development, which has become almost impossible due to the decrease in the number of clients. In 2009 they have the opportunity to choose completed projects “, says Irina Petrescu from ESOP.

Although, at first glance, it seems an interesting solution, it is not easy to put into practice. In the context of an oversupply on the market, in parallel with the declining number of customers, the market has transformed from a market of owners into a market of customers. The latter have a choice at the moment, and almost no one pre-rents projects under construction. The situation is similar on the residential market, where customers want to see what they are buying, therefore they are heading to completed homes.

A higher success rate of the “built-to-suit” concept may exist in small buildings dedicated to a single client or residential projects such as individual or coupled villas. “But even in their case, the built-to-suit concept, to have luck in 2009, the structure should be raised, and the partitioning part and the finishes should be made according to the needs, but also to the clients’ budget. In this way, the time for moving clients is shorter and more predictable “, says Irina Petrescu from ESOP.

In the case of medium and large projects, in which you intend to build starting only from the location, at the request of several clients, this type of project will be more challenging to accomplish. It isn’t easy to build something from scratch, having several requirements and tastes to reconcile at the same time. “In such cases, we recommend choosing an anchor client to use more than half of the space and the building to be customized for his needs. Along the way, the other tenants will customize their space only inside,” says Irina Petrescu of the ESOP.

Those who do not find an anchor-tenant during this period, but have the financing provided to complete the project can start the works taking advantage of the decrease in prices for materials and labor. “Our opinion is that after the crisis passes and the market recovers, those who will manage to build in this period of crisis will benefit, offering in 2-3 years new projects, with good location, well divided and endowed modern “, says Irina Petrescu from ESOP.


Maria Neda

PR & Media Coordinator, PR & Media Consultant, with background as a journalist in the economic press and experience as a consultant in Urban Development.

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