Fees seen declining for build-to-suits.

Though many developers are actively pursuing build-to-suit projects today, their fees are being cut drastically, reports Alan Kessler, president of Commercial Developments International/East, Inc. (CDI/East).

In fact, build-to-suit fees have dropped so steeply that in brokers in the deal are netting much more revenue on commissions than the developers are receiving in fees -without facing the developer's enormous risk, added Kessler.

The CDI executive observes that "in healthy times," a developer's fee greatly exceeds the broker's commission. "But today, typically, developers might get a fee of six figures, while brokers receive commissions of seven figures, said Kessler.

"Large corporations know that developers are chasing them, since they represent one of the few viable development opportunities around. And because many developers have serious cash-flow problems, they will even do build-to-suits just to cover their overhead, without any profit..

"With that knowledge, the corporate tenants are squeezing developers as they have never been squeezed before. What the corporations don't understand is that by squeezing so hard, they could affect the quality of the project."

Even such major national developers of the caliber of Trammell Crow are bidding on build-to-suits as small as 100,000 square feet, according to Kessler.