Build-to-Suit or Spec: What a Warehouse Tenant Gets, and What to Put in Writing

A company that needs a new warehouse in Texas usually ends up choosing between two buildings. One is a spec building, built by a developer before any tenant signed, and finished out for whoever leases it. The other is a build-to-suit, designed and built for one tenant’s operation, usually under a long lease. Both can be the right answer. The difference is in what the tenant gets, what it pays for, and how much of that has to be written down before the lease is signed.

This guide is for operators and their real estate teams comparing the two. The broader question of building versus leasing existing space is covered on the design-build and build-to-suit page.

What a spec building includes

A spec warehouse is designed to lease to the widest range of tenants. The developer chooses the clear height, the building depth, the column spacing, the dock layout, the truck court, the sprinkler system, and the electrical service with that market in mind. What the tenant receives is a shell: structure, roof, slab, dock openings, sprinklers, and base power, often with a small spec office or none.

Everything specific to the tenant comes later as a tenant improvement, or TI: the office, dock levelers and seals, added power, lighting, racking, and any change to the sprinklers. The lease sets how much of that the landlord pays, usually as a TI allowance, and the tenant pays the rest.

What a build-to-suit includes

A build-to-suit starts from the tenant’s operation. The site, the building size, the dock count, the slab, the power, the office, and the yard are designed for one known use. The tenant’s requirements are attached to the lease, often as a work letter or a building specification exhibit, and the developer commits to deliver a building that meets them by a target date.

That makes the work letter the most important construction document the tenant will sign. Whatever is missing from it is either a change order later or a building that does not quite fit.

Where the two paths differ most

Time. A spec building that is already standing can be occupied once its TI is finished. A build-to-suit needs site work, design, permits, and construction. If the operation has to open soon, that alone may decide it.

Fit. A spec building’s clear height, slab, and dock layout were chosen for the market, not for you. If the operation needs heavier floors, more doors, a larger truck court, cold storage, or high power, closing the gap in a spec building can be expensive or impossible.

Fire protection. The sprinkler design in a spec shell assumes a storage height and a commodity. A tenant that stores higher, or stores plastics or other higher-hazard goods, may need the system upgraded and a new fire marshal review. That is one of the most common surprises in a spec lease.

Cost and control. In a spec lease, the tenant controls the TI scope but not the shell. In a build-to-suit, the tenant shapes the whole building but commits to a longer lease and to the requirements it signed.

What to put in the work letter

Whether it is a build-to-suit work letter or the TI exhibit of a spec lease, the same items deserve precise answers:

• Clear height, slab thickness and flatness, and the rack layout it must support
• Dock door count, leveler and seal specification, and truck court depth
• Trailer and car parking counts
• Sprinkler design basis: commodity class and storage height
• Electrical service size, and where future power can be added
• Office size, finish level, and restrooms
• Heating, ventilation, and any conditioned or cold space
• Security, fencing, gates, and yard lighting
• The delivery date, how it is measured, and what happens if it is missed
• Who pays for changes after signing, and how they are priced

Vague language such as “standard warehouse finishes” or “adequate power” is where disputes start. Numbers and drawings are better.

Get the construction answers before the lease

The lease and the work letter are negotiated between the tenant and the developer, with their brokers and lawyers. Construction cost and schedule should inform that negotiation, not follow it. A contractor can price the tenant’s requirements against a spec shell’s TI, or against a build-to-suit, so both paths compare on real numbers before anyone signs.

AP does that work in preconstruction. The Dishaka facility, a 108,040 SF tilt-wall office, production, and warehouse building, shows how one operation’s requirements become one building. For the warehouse side of the business, see the warehouse construction page. If you are comparing a spec building with a build-to-suit, send us the requirements and the candidate buildings or sites, and we will show what each path costs and how long it takes.