In fact, build-to-suits are becoming a national trend, says David Murphy, an industrial broker in the Orlando office of C.B. Richard Ellis Inc. "Our speculative market has decreased dramatically under adverse market conditions," Murphy tells GlobeSt.com, "leaving room for developers to provide build-to suit options to tenants

Additionally, large industrial tenants have begun a consolidation trend, particularly in the logistics sector. "These tenants are opting for fewer locations but larger boxes, many times in the 500,00-sf-or-larger-category," Murphy says. "Regardless of market, there are typically few speculative projects available of this size at any given time, so they end up as build-to-suit candidates."

In California, Mike Wells, Northwest regional manager of Panattoni Development Co., Sacramento, CA, notes a similar trend. "We are seeing the development of larger distribution centers, ranging in size from 500,000 sf to two million sf," Wells tells GlobeSt.com West Coast bureau chief Brian Miller. "These facilities are not commonly built on spec because they do not meet the test of being reusable by multiple tenants, in part because of the depth of the bays."

In the New York-New Jersey markets, larger companies favor build-to-suits over spec projects because they can plan and underwrite the venture over a period of years.

"The biggest problem is that nobody plans ahead," Jonathan Schultz, president of the Woodbridge, NJ-based Schultz Organization, tells GlobeSt.com Northeast bureau chief Glen Thompson. "If clients are looking for a warehouse and they can find a building that's going up, they'll grab it, because they're usually behind the curve" in finding a location at that moment.

Like Schultz, Anthony Rimikis, senior vice president of development and construction for Brandywine Realty Trust in Newtown Square, PA, says build-to-suits are favored more by the big user than the smaller tenant. "Build-to-suits are very good for companies that have grown and need to take on more space," Rimikis tells Thompson. "The client can have a much more functional facility. They design the infrastructure; design the envelope; and they're able to lay it out and be part of the process. When you find a company that will do that, they're going to get exactly what they want."

In the Chicago area, lower land costs played a major role in Catellus Development Corp.'s decision to locate a one-million-sf build-to-suit for Battle Creek, MI-based Kellogg's Corp. in the growing I-55 corridor in Minooka, IL.

"That was driven purely by cost" and location, Tim Hennelly, vice president of sales for FCL Builders, Itasca, IL, tells GlobeSt.com Midwest bureau chief Mark Ruda. "You don't usually finish these projects in the same amount of time as spec buildings."

Build-to-suits are catching on more than they have in the past because "people want to design their own space," Hennelly says. "It's a lot like buying a custom-built home."

Some of the larger build-to-suits in the Chicago market are the 871,000-sf Pactiv Corp. structure built by Columbus, OH-based Pizzuti Cos. in the 800-acre Pinnacle business Park in Romeoville, IL; the 400,000-sf Anonymous Diehl building built by FCL in Naperville, IL and leased to LTD Commodities; and the 353,000-sf building erected by Kajima Construction Services of Palatine, IL for Fuji Photo Film USA Inc. at IDI Inc.'s Turnberry Lakes International Business Park in Hanover Park, IL.

In the Dallas-Ft. Worth market, Volkswagen Corp. is moving into a 375,000-sf build-to-suit in the AllianceTexas sector near existing rail lines. "We're seeing a significant increase in users wanting rail service," Bob Alter tells GlobeSt.com Southwest bureau chief Connie Gore. Alter is vice president of marketing for Hillwood Properties in Ft. Worth.

That would mean more build-to-suit construction in industrial parks because existing rail-served structures are usually antiquated and not cost-effective to retrofit, Alter says.

In the Southeast, the newest build-to-suit is a 400,000-sf, $140-million complex going up in Rome, GA, 40 miles northwest of Downtown Atlanta for Pirelli Tire North America. The Rome site will be Pirelli's new North American headquarters after relocating from New Haven, CT in late 2002.

Instant Insights /

BIG PICTURE: Build-to-Suits at the Plate as Spec Projects Get Sidelined

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