Suppose a landlord has a large tenant who leases a 10,000 sf office space in downtown Austin that wants to expand in contiguous space in your building however they are not able to because you occupy a much smaller space adjacent to their space. Or maybe a large prospective tenant is interested in leasing space in a landlords building however your small space is right smack dab in the middle of two larger spaces.
If those instances ever occur you might be getting a letter or phone call from the landlord offering you $$XX amount to buy you out of your remaining office lease.
What should you charge them? What would be a good deal?
Well, there is no one answer to that as it depends on a lot of factors. You really have to compare the cost of staying where you are to the total cost of relocating to a new building. Below are 10 things to consider.
- What base rental rate and operating expenses do other comparable buildings charge? If the market is hotter than it was 3 years ago then office rental rates could be much higher in comparable buildings than what you are paying right now. If that is the case you need to factor that into what you charge the landlord to buy you out of your existing lease.
- Do the other buildings have spaces that are similar in configuration and windowed offices?
- Do the other office building alternatives have the same amenities as your existing one?
- What is the existing condition of the other spaces? Do they need a lot of work and will take several months to make ready or are the spaces move in ready?
- What tenant improvement costs will you incur with the alternatives above and beyond what those landlords are willing to pay for?
- How much will new phone/data cabling cost to install in the other offices?
- How much will it cost to move/relocate your company?
- How much is new office stationary?
- How much will it cost to relocate all your phone/IT equipment (e.g. servers, storage, phone systems, etc.)?
- How much downtime will your company incur as a result of the relocation? What are the costs of that?
These are just a few things to factor into your decision if/when a landlord asks to buy you out of your existing office lease. If you have any questions don’t hesitate to contact us.