Tailor- made warehouse - advantages adn disadvantages of BTS/BTO solutions

Rafał Kijek

Phone 525 230 940

Property Negotiator

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There are already over 14 million sq m of modern warehouse space available on the Polish warehouse market. Often, however, despite such a large selection, none of the available facilities meet all the requirements, and making the necessary improvements is too expensive or technically impossible. In such case you should consider implementing your project with the use of a BTS (build to suit) or BTO (build to own) solution.

FOR WHOM?

Theoretically, BTS/BTO facilities can be an interesting solution for everyone, but market practice shows that there are several key criteria that determine whether it is possible to implement a project in such a formula. The basic criteria that need to be met include:

– the size of the warehouse: it is rare for developers to implement a project of less than 4,000 sq m (unless the warehouse has additional requirements like a much higher height). The upper limit does not exist, and as the examples from the market show, developers are perfectly capable of carrying out projects of even more than 100,000 sq m.

– rent period: the rent period preferred by developers is a minimum of 10 years. In exceptional situations, when the project is fairly standard and the developer sees the chance of its further commercialization, it will decide to shorten this period to 5 years.

– stable financial situation of the tenant: the developer in the case of BTS/BTO projects will surely ask the tenant for the presentation of financial documents and depending on their assessment, appropriate security for the contract will be required (bank guarantees, deposit).

– the beginning of the rent: the construction time of the warehouse building itself is at least half a year, additional time is required to collect all required permits (possible purchase of land). Therefore, such a project should be started for a minimum of one year and sometimes even longer before the planned start of storage.

 

WHERE?

Freedom of choice of location is often one of the basic factors determining the implementation of the project in the Build To Suit or Build To Own formula. The BTS/BTO warehouse can be built:

– in the developer’s existing logistics park,

– in the land owned by the tenant,

– in the land the developer owns in his portfolio or that will be purchased specifically for the implementation of the project in accordance with the tenant’s indication.

COST

At first glance, it would seem that the project implemented in the BTS/BTO formula will be much more expensive than renting an existing warehouse. However, what will be the difference in the rental price is determined by many factors and the final price of the warehouse may not differ significantly from the rental of space in the existing location. Core factors determining the difference in price cover:

– cost of adaptation: when we rent an existing building, the developer makes all required modifications for the tenant. In the situation when the tenant will use the storage space for the production purposes, often many refurbishments are required, such as: making additional skylights, distributing utilities within the warehouse, adjusting the gates/docks. The cost of each such adjustment of the facility is included in the rent calculation. Should the facility be created "from scratch", all such changes can be planned at the construction stage, which significantly reduces the costs of adaptation.

– location: if we decide to build a stand-alone BTS building outside the existing park, the developer will have to prepare and make all additional infrastructure (roads, fencing, connections) which can increase the cost of the rent.

ADVANTAGES OF BTS/BTO SOLUTIONS

The main advantages when choosing a warehouse in the BTS/BTO formula are the aforementioned freedom in the choice of location and the possibility of total adaptation of the space for the needs of the tenant. An additional advantage in the case of such a project implementation model is also the possibility of adapting the space around the warehouse in accordance with the will of the tenant, e.g. designing an additional parking area for cars or bicycles.

One of the adaptations that is impossible to perform in the case of existing facilities is to match the height of the warehouse to the needs of the tenant. This can be particularly important in the case of cross-dock space, where each additional metre of height affects the heating costs, and the standard height of 10m A-class buildings is not required.

DISADVANTAGES OF BTS/BTO PROJECTS

One of the main disadvantages of such projects is the aforementioned implementation time, often exceeding one year. Additional disadvantages include the possible higher rental cost and the required additional financial security and/or longer rental period of the warehouse.

SUMMARY

More and more facilities are being implemented on the Polish market in the BTS/BTO formula. If you are looking for a warehouse facility that must meet special requirements or none of the existing warehouses meets the requirements for location, it is worth considering the implementation of the project in such a model. We invite you to contact our specialists who will help answer your questions whether the BTS/BTO object is definitely the optimal solution and will help you to go through the entire rental process safely.

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