How does “build to suit” land leasing work? If structures are built on leased land, aren’t they then owned by the lessor after the lease period ends? What is the advantage of this arrangement?
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Someone looking to build or expand a business may not have the capital to build their own structure. They may also have very specific needs (plumbing and fixtures for a restaurant or a specific amount of square footage for office space) that they cant find in the local leased space market. So a land owner who wants to start generating revenue will sometimes fund the cost of building a structure based on a new lessee’s requirements. Typically, the lessee will have to sign a minimum lease (say 3 or 5 years). At the end of the lease, the landlord will have equity in a building that they can then lease out again.
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