Sometimes, a box isn’t just a box. While big-box industrial speculative developments can meet many market needs, some industrial end-users’ needs are simply too unique for existing buildings. At that point, design-build or build-to-suit (BTS) projects may be the only viable options—but how does a firm know the right direction for a particular project? And how can brokers best help them navigate the complex decision-making process?
In fact, the more complex a deal, the more a broker can help an end-user who is faced with a decision about their needs. This is when having a strong advisor makes all the difference. An experienced and knowledgeable broker such as an SIOR can guide end-users through the entire process and help them evaluate all options to select the best course of action.
By partnering with an adviser who has been through the design-build and/or BTS process many times before, the user can benefit from both successes and failures of past projects. Here are a few of the primary ways SIORs can add value in this process.
Establishing the requirement
When an experienced adviser gets involved with the user early in the process, the adviser can help separate the “wants” from the “needs.” Once established, experienced industrial brokers who know what’s available in the marketplace can almost immediately tell if something will not be easily found in an existing building. For example, specialized manufacturing processes or logistics firms may require a very specific number of loading docks and unique transportation access that simply aren’t available or achievable in existing buildings. Additionally, sophisticated brokers know the right questions to ask, can do their due diligence, and help their clients keep on a clear timeline.
As brokers, we are the realists. We help determine if a client’s desires don’t align with their estimated costs and timeline, and we can make sure a design-build or BTS process is achievable from day one. We can outline the process from start to finish to keep clients’ expectations in check. If that process will eventually include a new building with customized specifications, we can manage expectations and provide insights on potential developer or design-build contractor partners.
Choosing a site, choosing an approach
Depending on the market, sites available for BTS or design-build may be developer-controlled, or the end-user will be able to purchase the site and build from there. In the Chicago market, BTS sites are typically developer-controlled, so once the need for a custom facility is identified, a request for proposals (RFP) process typically decides where a design-build or BTS project is located. Since experienced brokers work with so many industrial properties on a regular basis, we can provide real-time insights and best practices from what other clients are doing. Honing a specific and strong RFP can result in fewer surprises down the line for clients, as well as a more reliable set of time frames and costs.
One key decision point is the choice between BTS for lease; BTS for sale; or design-build. Any of these three options can result in the same facility, but the financial structure for the user—short- and long-term—can vary greatly. An experienced broker can help an end-user assess the pros and cons of the options available, including which sites offer the opportunities for different financial structures. Prior to choosing a site, the issues of labor force and economic incentives also come center-stage, yet another part of the process where an experienced negotiator can save clients significant costs and add long-term value to the business.
Better broker, smoother project
The moral of the story: not just any broker can navigate the murky waters of siting and building a custom facility. It takes an experienced broker with current market knowledge to effectively run a design-build or BTS process from start to finish. It pays to work with brokers who have been around the block more than a few times and understand how to digest and apply all the data efficiently. Brokers with the SIOR designation have proven experience on these projects and often present the best option to advise end-users during this complex process.
*Editor’s note: Dan Benassi’s colleague at Entre Commercial Realty, Mike Gazzola, also contributed insights to this article.