Tenants who consider buying out of their existing office lease usually do so for three main reasons:
1) They need to relocate to a larger space;
2) They have less than two years remaining on their lease; or
3) They need to reduce the size of their office.
Tenants should consider telling their landlord about their intention to leave, whether it will be at the end of their existing lease term or sooner. Then, the landlord may become interested in finding a replacement tenant before the lease expiration to avoid an extended vacancy and will sometimes negotiate a preemptive buyout under relatively favorable terms.
Alternatively, tenants may first appoint a broker to list their space as available. Then, once they find a new occupant, they can negotiate a buyout with the landlord.
The proceeds from the buyout will be used by the landlord to pay for space renovations and any other necessary expenses, either in preparation for a new tenant and/or to entice one by providing an abundance of free rent 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 a new office with an impending buyout expense from your previous one? Landlords will often offer upfront free rent, a discounted rent for your first year or will fund many of your transition expenses. By doing so, they will keep your first-year costs to a minimum, and, in actuality, they will be factoring those costs into the rent in years 2 and beyond.