What is the difference between built-to-suit and pre-leased commercial property?

Built-to-suit commercial property is custom-constructed based on a specific tenant's requirements before occupancy, while pre-leased property refers to an already completed building with an existing tenant and lease agreement in place, typically purchased by investors for immediate rental income.

Built-to-Suit Characteristics

• Designed and constructed specifically to match a tenant's operational needs.
• Longer development timeline since construction begins after lease commitment.
• Often involves long-term lease agreements of 9-15 years with the tenant.

Pre-Leased Property Characteristics

• Already constructed with an existing tenant generating immediate rental income.
• Attractive to investors seeking predictable cash flow without development risk.
• Valuation is closely tied to tenant credibility and remaining lease tenure.

Key Differences for Investors

• Built-to-suit involves development risk but customization benefits for tenants.
• Pre-leased property offers immediate yield with lower construction risk.
• Exit liquidity for pre-leased assets depends heavily on tenant lease stability.

built-to-suit suits tenants with specific operational needs, while pre-leased property suits investors prioritizing immediate, stable rental income with minimal development risk.