Everything was moving along according to plan.
Your firm locked in an office lease for space that aligned perfectly with both its immediate and long-term needs. It was the team's second home - a place where your business operated on a daily basis and was set to grow for years to come.
And then came 2020.
Almost overnight, that same office space emptied out and quickly became one of your largest liabilities:
underutilized & costing a fortune.
If the above sounds familiar, it may be worth exploring a Lease Buyout.
What is a Lease Buyout?
In simplest terms, an office lease buyout is a mutually agreed upon surrender and termination of space.
With the complexities created by the pandemic and its direct impact on many firms finances, lease buyouts have become increasingly common in today's market and should be considered by firms re-evaluating their space needs.
Below are some of the benefits and variables on both sides:
Benefits:
- Shed a liability that serves no future purpose
- Pay less than 100% of your remaining obligation
- Save the time and expense tied to subleasing (and subtenant credit risk)
- Current health of the business
- Remaining lease term and obligation
- Unamortized initial transaction costs (concession package, etc.)
- Appetite for litigation vs. reaching a settlement
Benefits:
- Receive a lump-sum payment upon surrender
- Eliminate future risk of a tenant defaulting on obligations
- Potential to “double-dip” by re-renting the space at market price
- Perceived risk of tenant fulfilling remaining obligations
- Vacancy & rent collection numbers in the building
- Cost of re-letting the space
- Landlord flexibility (i.e. lender requirements)
- Appetite for litigation vs. reaching a settlement
Interested in exploring a lease buyout?
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