Industrial Real Estate Tool · Free
Spec Building Yield-on-Cost Calculator
Before you option a parcel, know whether a warehouse on it pencils. Enter the land, construction costs, schedule and financing to get the all-in cost, the yield on cost against the exit cap, your profit margin, and the most you can pay for the ground.
Start from a scenario
Land & building
≈ 174,240 SF after setbacks and stormwater. 35–45% is typical.
Development costs
Structure, roof, slab, docks, fire protection.
Paving, utilities, stormwater, per building SF.
Design, engineering, legal, permits.
Varies widely by county and city.
Excludes land and financing.
Spec office, lighting, dock equipment.
On total rent over the term.
Taxes, insurance, CAM during lease-up.
Schedule & financing
Permit to certificate of occupancy.
0 for pre-leased or build-to-suit.
Equity goes in first.
Illustrative. Get a current quote.
Income & exit
NNN, first-year.
Shown for reference; below NOI.
Yield-on-cost cushion over the exit cap. 100–150 bps is a common bar.
Yield on cost
7.06%
vs. a 6% exit cap = 106 bps of development spread · $139.94/SF all-in on 174,240 SF
This deal clears your spread
You need 7.00% on cost (6% cap + 100 bps). You could pay up to $369,229/acre for the land and still hit it.
Total project cost
$24,382,745
$139.94/SF · land 15%
Stabilized NOI
$1,721,395
$10.50/SF NNN less vacancy, mgmt
Value at exit
$28,689,923
$164.66/SF at 6% cap
Profit on cost
$3,876,829
15.9% after selling costs
Levered IRR
29.7%
over 18 months, annualized
Equity multiple
1.45×
Equity required
$8,533,961
35% of cost, funded first
Construction loan
$15,848,784
incl. $901,176 capitalized interest
Where the money goes
| Cost | Amount | $/SF | % of total |
|---|---|---|---|
| Land + closing | $3,552,500 | $20.39 | 14.6% |
| Building shell | $12,545,280 | $72.00 | 51.5% |
| Site work | $2,090,880 | $12.00 | 8.6% |
| Soft costs | $1,756,339 | $10.08 | 7.2% |
| Impact / mobility fees | $696,960 | $4.00 | 2.9% |
| Contingency | $731,808 | $4.20 | 3.0% |
| Developer fee | $534,638 | $3.07 | 2.2% |
| Tenant improvements | $522,720 | $3.00 | 2.1% |
| Leasing commissions | $457,380 | $2.63 | 1.9% |
| Free rent | $304,920 | $1.75 | 1.3% |
| Carry during lease-up | $130,680 | $0.75 | 0.5% |
| Loan fee | $157,464 | $0.90 | 0.6% |
| Construction interest | $901,176 | $5.17 | 3.7% |
| Total project cost | $24,382,745 | $139.94 | 100% |
Profit margin: exit cap × market rent
| Exit cap ↓ / Rent → | −10% | Base | +10% |
|---|---|---|---|
| 5.50% | 14.1% | 26.4% | 38.7% |
| 6.00% | 4.6% | 15.9% | 27.1% |
| 6.50% | -3.4% | 7.0% | 17.3% |
| 7.00% | -10.3% | -0.7% | 8.9% |
Profit as a % of total cost. Red is a loss; amber is under 10%, thin for spec risk.
Profit margin: construction cost × market rent
| Hard cost ↓ / Rent → | −10% | Base | +10% |
|---|---|---|---|
| −10% | 13.2% | 25.4% | 37.5% |
| Base | 4.6% | 15.9% | 27.1% |
| +10% | -2.7% | 7.8% | 18.2% |
| +20% | -9.2% | 0.7% | 10.4% |
Profit as a % of total cost. Red is a loss; amber is under 10%, thin for spec risk.
Simplified: costs are spread evenly over the schedule, the loan draws equity-first with capitalized interest, and the building is sold when the lease starts on stabilized NOI. It does not model taxes, cost of entitlements, land-carry before closing, phasing, or a refinance-and-hold exit. Spec development carries construction, lease-up and market risk — underwrite with a builder’s numbers and a lender’s terms.
Have a site — or looking for one?
Email yourself this pro forma. Ryan can test it against current industrial land comps and entitled sites, and tell you what rent and cap rate the market is actually giving on spec product in your submarket.
Submitting does not create a brokerage relationship. MaxLife Realty LLC · Ryan Solberg, FL Broker License #BK3354351.
Formulas Behind the Development Math
Costs are scheduled month by month: land and permits at closing, construction spread evenly over the build, carry during lease-up, and TI, leasing commissions and free rent when the lease starts. Equity goes in first and the loan funds the rest, with interest capitalized. The calculator iterates until interest and cost agree.
Total Cost = Land + Closing + Hard + Site + Soft + Impact + Contingency + Dev Fee + TI + LC + Free Rent + Carry + Loan Fee + Capitalized InterestStabilized NOI = Rent/SF × SF × (1 − Vacancy) × (1 − Management %)Yield on Cost = Stabilized NOI ÷ Total CostSpread = (Yield on Cost − Exit Cap) in basis pointsExit Value = NOI ÷ Exit Cap; Profit = Exit Value × (1 − Sale Costs) − Total CostMax Land Price = the land $/acre at which Yield on Cost equals Exit Cap + Required SpreadWorked Example: A 10-Acre Bulk Warehouse Site
Hypothetical numbers for illustration, not a quote or a forecast. The assumptions:
- →10 acres at $350,000/acre, 1.5% land closing; 40% coverage gives 174,240 SF
- →Shell $72/SF, site work $12/SF, soft costs 12%, impact fees $4/SF, contingency 5%, developer fee 3%
- →TI $3/SF, 5% commission on a 5-year lease, 2 months free rent, $1.50/SF/yr carry; 12-month build, 6-month lease-up
- →65% loan-to-cost at 7.50%, 1% loan fee; market rent $10.50/SF NNN, 3% vacancy, 3% management
- →6.00% exit cap, 1.5% sale costs, 100 bps required spread
Computed with this page's engine (runSpecBuilding) using the default inputs. All inputs are illustrative assumptions, not quotes or market data. The 29.7% levered IRR reflects a short 18-month hold with 65% leverage and is highly sensitive to rent and exit cap.
Inputs and Limits
Simplified schedule
Costs are spread evenly, there is a single lease start, and the project sells at stabilization. There is no phasing, pre-development period, entitlement risk, hold-and-refinance exit or income tax.
Solver limits
Maximum land price and break-even rent are found by search within a bounded range. When the target spread cannot be reached at any land price, or no rent in range reaches it, the tool shows no value rather than a number.
Single building type
Inputs are per-SF for a single-tenant style building on one site. Stormwater, wetlands, off-site infrastructure and parking requirements are captured only through the coverage and cost inputs you enter.
Spread bar is a rule of thumb
The 100 to 150 bps spread cited in the FAQ is a commonly used screening rule, not a standard from a cited source. Set your own.
How the development math works
A developer’s return comes from one gap: yield on cost (stabilized NOI ÷ everything it took to build) against the cap rate the finished building sells at. Build at a 7% yield and sell at a 6% cap and the spread is your profit — but only if the rent, the cost and the schedule hold.
This calculator runs the project month by month. Land and permits close first, construction costs spread over the build, carry accrues during lease-up, and TI, commissions and free rent hit when the lease starts. Equity goes in first, the construction loan funds the rest, and its interest is capitalized. Then it works backward to the maximum land price and break-even rent for the spread you require. Test the result against a finished building with the industrial deal analyzer, or value raw ground with the land deal analyzer.
Spec development FAQs
What is yield on cost?
Yield on cost is a development's stabilized net operating income divided by its total all-in cost — land, construction, soft costs, fees, lease-up costs and financing. It is the return the project earns on the money spent to create it. A building that costs $24 million and produces $1.7 million of NOI has a yield on cost of about 7%.
How much spread over the cap rate do developers need?
Developers want yield on cost meaningfully above the cap rate the finished building would sell at, because that gap pays them for entitlement, construction, lease-up and market risk. A spread of roughly 100–150 basis points or more is a commonly cited bar, and higher for riskier or longer projects. The calculator lets you set your own required spread and shows whether the deal clears it.
What is included in the total project cost?
Land and closing costs; the building shell and site work; soft costs such as design, engineering and permits; impact and mobility fees; contingency; a developer fee; tenant improvements, leasing commissions and free rent when the first lease starts; carrying costs while the building is vacant; the construction loan fee; and interest on the loan, which is capitalized into the loan. Interest depends on cost and cost depends on interest, so the calculator solves the two together.
How do I use the maximum land price?
This is the residual land value: hold construction costs, rent and exit cap constant and work backward to the highest land price that still delivers your required yield on cost. If the land is asking more than the residual, the seller is pricing in rents or costs you cannot underwrite. It is a useful negotiating anchor and an early screen on whether a parcel is worth a site plan.
How do pre-leased and build-to-suit projects differ?
Set lease-up to 0 months. There is no vacancy carry, less interest, and the building sells or refinances when it opens, which usually raises the return and lowers the risk — and normally lowers the market rent you can push. A build-to-suit typically comes with a signed lease, so the question shifts from whether it will lease to whether the rent supports the cost.
What Florida-specific costs should I check?
Stormwater retention often consumes 15–25% of a site, which lowers building coverage, so verify what actually fits. Impact and mobility fees vary widely by county and city and can be a meaningful cost per square foot. Also confirm wind-load design, insurance costs, utility availability, and how long permitting and water-management district approvals take — longer timelines add interest and carry.
Disclaimer: This calculator is for educational and informational purposes only and is not investment, construction, tax or legal advice. It uses simplified assumptions — evenly spread costs, a single lease start, and a sale at stabilization — and it does not model entitlement risk, phasing, taxes or a hold-and-refinance exit. Verify costs with a builder, rents with a broker, and terms with a lender before committing capital.
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