A good commercial real estate lease is about options. First rights of refusals, tenant improvement (TI) allowances and flexible floorplans. The more agile you can be when in your lease, the better the deal you signed. The same can be said for getting out of your lease or eliminating unused space. The more options you have, the easier the exit. And when that situation arises, a lease buyout may be the way to go.

 

Buyouts are functionally pretty simple: a tenant pays a landlord a sum based on the remaining terms of the lease in exchange for being able to move out or reduce square footage. It can also involve the landlord's recapture of TI costs and all other fees incurred by your occupancy. And like all business deals, things need to be negotiated. However, settling on terms can lead to rough waters because on the surface, it appears the landlord has the upper hand. Thus, it's absolutely crucial that both sides of the table communicate openly about their needs. It is in these situations that your tenant representative, by knowing the undercurrents of the market, becomes a very high-level business partner.

 

Landlords may already be prepared for your exit or reduction in space but in some cases will be negotiating with the opposite stance. Your tenant rep can counter this position by knowing if potential new tenants have already inquired about the space or are at least actively touring the market. In turn, they can help the landlord realize the marketability of the soon-to-be-available space. Additionally, specific insight into the landlord's financial exposure, as well as historical data on their risk tolerance with tenants, is invaluable when negotiating position for a buyout.

 

The details of a lease buyout, even a small one, are complicated for everyone. If handled improperly, your business may suffer a dent in its reputation and lose some ground when it's time to negotiate another lease. By remaining professional, ethical and open, you'll come away with your business character intact and a more streamlined operation.

 

 

No Obligation Lease Evaluation.   Ryan Richmond 248.470.8533

  

 

Stay informed on the Southfield, MI real estate market. While specializing in tenant representation in the Southfield office market we can remain unbias in our advice and publication. Stay up to date with market trends and research. read more