Spec Suites or Tenant Buildouts: What’s More Cost Effective?
While build-to-suit may enjoy a quicker turnaround than speculative development in the industrial sector, the opposite appears to be true for office, at least in suburban markets. That’s the conclusion to be drawn from a Colliers International study comparing spec suites and second-generation office space.
The study looked at 75 spec suites in the Chicago suburbs and found that these spaces were on the market for an average of six months. Twenty-five percent of the space, which typically ranges between 1,000 and 5,000 square feet, was leased immediately.
“By contrast, build-to-suit space averages 12 to 36 months to lease, with additional downtime needed for the build-out,” according to Colliers.
The expense per square foot of building out a spec suite comes in at the high end of what tenant improvements usually entail, Colliers says. However, second-generation office averages 12 months of gross free rent, compared to three months for spec.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).