Build-to-Suit Lease

BTS

Build-to-suit leases: developer builds to tenant spec, tenant commits for 15-25 years. Learn BTS structure, NNN operation, and critical abstractions.

By Angel Campa, Founder · Updated March 2026

Overview

A Build-to-Suit Lease is a long-term lease where the landlord (developer) constructs a building to the tenant's exact specifications on land the landlord owns or acquires. The tenant commits to the lease before construction begins, typically for 15-25 years. After completion, the lease usually operates as a NNN structure. BTS transactions are common for corporate headquarters, distribution centers, and large retail users.

Expense Breakdown

Tenant Pays

  • •Base rent (typically NNN after construction completion)
  • •Property taxes
  • •Building insurance
  • •All maintenance and operating expenses (NNN structure)
  • •HVAC maintenance and replacement
  • •Utilities
  • •Janitorial services

Landlord Pays

  • •Land acquisition cost
  • •Construction financing and development costs
  • •Construction contingency and overruns (in landlord-driven BTS)
  • •Pre-construction development fees

Typical Profile

Typical Industries

Corporate HeadquartersDistribution / Fulfillment CentersManufacturingHealthcare CampusesData Centers

Typical Term Length

15–25 years

Pros & Cons

For Tenant

Pros

  • +Building designed and constructed to exact operational specifications
  • +Avoids capital expenditure of purchasing land and building
  • +Long-term site security aligned with business planning horizons
  • +Developer absorbs construction risk and financing complexity

Cons

  • −Locked into very long lease term before construction is complete
  • −Changes to specifications after groundbreaking are expensive
  • −Residual value of custom-built space is low if tenant exits early
  • −Construction delays can disrupt operations planning

For Landlord

Pros

  • +Pre-leased before construction — zero lease-up risk
  • +Long lease term (15-25 years) provides exceptional income certainty
  • +Investment-grade tenants command low cap rate sales to net lease investors
  • +Development fee and yield-on-cost spread create strong returns

Cons

  • −Construction risk — cost overruns reduce yield-on-cost returns
  • −Long development timeline before rent commences
  • −Tenant credit risk is critical — no alternative tenant for custom-built space
  • −Highly specialized buildings have limited retenanting options on default

Critical Fields to Abstract

These are the highest-priority fields Lextract extracts from BTS leases. Click any field to learn what it means and why it matters.

Base RentRent Commencement DateLease Expiration DateTenant Improvement AllowanceRenewal OptionsTermination OptionsAssignment RightsPermitted UseInsurance RequirementsProperty Taxes

Common Red Flags

Lextract automatically detects these red flags in BTS leases. Click any flag to learn the impact and what to do.

No Renewal OptionNo Termination OptionMissing Restoration ClarityRecapture Right PresentMissing Audit Rights

Compare With

Nnn Lease

View expense breakdown and red flags →

Absolute Net Lease

View expense breakdown and red flags →

Ground Lease

View expense breakdown and red flags →

Modified Gross Lease

View expense breakdown and red flags →

Frequently Asked Questions

When does rent start in a build-to-suit lease?

Rent commencement in a build-to-suit lease is tied to construction completion and delivery of the premises to the tenant. The lease will specify a rent commencement date based on substantial completion, a certificate of occupancy, or a negotiated number of days after delivery. Tenants should negotiate a hard rent commencement date rather than one solely based on construction milestones.

What happens if construction is delayed in a build-to-suit lease?

Most build-to-suit leases address construction delays through force majeure provisions and landlord delay provisions. If the landlord causes delays, tenants typically receive free rent credits or have the right to extend the lease term at their option. If delays exceed a threshold, some leases give the tenant a termination right. These provisions must be carefully negotiated before execution.

How does Lextract abstract build-to-suit leases?

Lextract extracts all 126 standard fields from build-to-suit leases including the rent commencement trigger, construction completion definitions, tenant improvement allowance (if any), renewal options, termination rights, and the operating expense structure post-completion. Red flag detection flags missing termination options, absent renewal rights, and unclear restoration obligations at expiration.

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