Tenants looking for office space will often consider a sublease rather than a direct deal with the landlord. Subleases can be very favorable for tenants, as they often include furniture, and even phone systems, plus rental rates lower than a standard lease. However, tenants often make a mistake by dismissing subleasing opportunities when the term is too short. We encourage our clients to think “outside the box” and consider two methods for augmenting the term:
1) Simultaneously, commit to the sublease and a direct deal with the landlord beyond the sublease expiration date.
When you calculate the typical five-to-ten year lease average in this scenario, you will reap the upfront benefit of a lower rental rate during the sublease term. Even though the rental costs may be higher at the back end, the overall average will still be lower than a standard direct deal on vacant space.
2) Have the landlord negotiate a buyout of the existing tenant’s lease and then sign a direct lease with the landlord for your required term in the newly vacant area.
The landlord will invest part or all of the buyout dollars into your transaction via free rent, discounted base rent and/or a larger tenant improvement allowance for renovation of the space. As a result, the incoming tenant gets a great deal, far better than a standard lease.