Why We Buy Buildings Instead of Building Them

There is a reason PlaceMKR does not break ground on speculative development projects. It is not because we lack the capability. It is because the math consistently tells us there is a better way to create value.

In every market cycle, there is a tension between building new and buying existing. During the boom years, when capital was cheap and construction timelines were predictable, the calculus often favored development. Land was abundant, entitlements moved at a reasonable pace, and the spread between development cost and stabilized value was wide enough to justify the risk.

That calculus has fundamentally shifted. And understanding why is the key to understanding how we deploy capital in 2026.

The Development Risk Stack

Ground-up development has always carried risk. What has changed is that multiple risk factors are now compounding simultaneously in ways that make the total risk profile of new construction meaningfully higher than it was even three years ago.

Construction costs have risen roughly 34% since the end of 2020. Tariffs on steel and aluminum are adding 3% to 5% to total project costs. Labor availability has tightened as immigration policy reduces the construction workforce. Insurance premiums for new projects are escalating, particularly in weather-exposed markets. And entitlement timelines have lengthened in many jurisdictions, adding months or years of carrying costs before a single shovel hits the ground.

Each of these factors alone would be manageable. Stacked together, they create a development environment where the margin for error is thinner than it has been in a generation. A project that pencils at today's costs may not pencil at tomorrow's -- and "tomorrow" in development terms means two to three years from now, when the building actually delivers.

Then there is the timeline risk itself. A typical ground-up industrial project takes 18 to 36 months from site acquisition to tenant occupancy. During that entire period, the developer is carrying the full cost of the land, the construction loan, and the entitlement and permitting process without generating any revenue. If the market shifts during that window -- tenant demand softens, a competitor delivers a competing project, interest rates move -- the developer absorbs the loss with no ability to adjust.

The Acquisition Alternative

Compare that risk profile to acquiring an existing, functional building below its replacement cost.

The building already exists. There is no construction timeline, no entitlement risk, no exposure to rising material costs during a multi-year build. The asset can be evaluated as it stands today -- its physical condition, its tenant base, its infrastructure, its market position -- rather than as a set of projections about what it might become.

When we acquire a property at a meaningful discount to what it would cost to build the same facility today, we establish downside protection from day one. Our all-in basis -- acquisition price plus improvement costs -- is still below what a competitor would spend to build a comparable asset from scratch. That gap is our margin of safety, and it exists before we execute a single element of our repositioning plan.

The repositioning itself is where the value creation happens. We are not passive holders. We acquire assets with specific improvement plans -- expanding leasable area, upgrading building systems, modernizing infrastructure, enhancing tenant amenities -- that transform the property's competitive position within its submarket. But we execute those improvements from a protected basis, not a speculative one.

Why the Gap Keeps Widening

The argument for acquisition over development is not static. It is getting stronger.

Every tariff increase, every labor cost escalation, every insurance premium hike pushes the cost of new construction higher. That means the replacement cost of existing buildings keeps rising -- which means the discount at which we can acquire them represents an increasingly attractive spread.

At the same time, the development pipeline is contracting. Developers are responding rationally to higher costs and tighter margins by pausing or canceling projects. Every project that does not get built is supply that will not enter the market. That supply constraint benefits existing asset owners -- including buyers who acquire and reposition those assets -- by reducing future competition and supporting rental rate growth.

This dynamic creates a virtuous cycle for acquisition-focused strategies. The more expensive it becomes to build, the more valuable existing buildings become, and the fewer new buildings get started to compete with them. The buyers who recognized this dynamic early and built their platforms around it are the ones best positioned to compound value over the next several years.

When Development Makes Sense

This is not a blanket argument against development. There are situations where ground-up construction is the right answer -- build-to-suit projects with committed tenants, developments in markets with genuinely constrained existing inventory, or specialized facilities that simply do not exist in the current stock.

But speculative development in an environment of elevated construction costs, uncertain demand timelines, and tightening lending conditions carries a risk-reward profile that, in our view, does not compare favorably to disciplined acquisition at below-replacement-cost basis. We would rather buy a building that already has walls, a roof, utility connections, and a functional layout than bet that we can build one cheaper, faster, and better than the market will allow.

Our Approach

At PlaceMKR, the acquisition-first philosophy is not a recent pivot. It is foundational to how we have always operated. We identify assets where the existing infrastructure and physical plant represent embedded value that would be extraordinarily expensive to recreate -- crane-served manufacturing space, heavy power substations, specialized industrial configurations -- and we acquire them at a basis that gives us room to invest in repositioning while maintaining downside protection.

The current market is validating this approach in ways that even we find striking. As construction costs continue to climb and the development pipeline contracts, the acquisition math keeps getting more favorable. We are not waiting for the market to come to us. We are actively deploying capital into the exact opportunities this environment is creating.