Buyout Your Current Office Lease

Tenants who consider buying out of their existing office lease usually do so for three main reasons:

1) They need to reduce the size of their office;

2) They have less than three years remaining on their lease; or

3) They need to relocate to a larger space

In these cases, we recommend tenants appoint a broker to list their space as available on a sublease basis. Once a new occupant is found for a term that is typically longer than the remaining term, they can negotiate a buyout with their landlord so the new tenant and landlord can move forward in a direct relationship.  

The next step is for the tenant to tell their landlord about their intention to leave, and concurrently ask them to list their space as available on a direct basis. Depending on the length of lease term remaining and current market conditions, the landlord may become interested in finding a replacement tenant before the lease expiration to avoid a future extended vacancy and will negotiate a buyout if they find a new occupant of the space.

The proceeds from the buyout will be used by the landlord to pay for necessary expenses for the new tenant occupancy such as space renovations, free rent and/or a low first-year base rent. Thus, landlords can defray many of the costs they would have otherwise incurred to lease vacant space.

On the flip side, what happens when you negotiate for new office space with an impending buyout expense from your existing lease? Landlords will offer upfront free rent, discounted rent for the first year and/or will fund some or all of the tenant improvement and relocation expenses. By doing so, they will keep your first-year costs to a minimum, but, in actuality, they will be absorbing many of your buyout expenses.