What to Do if You Have Too Much Space and Are in the Middle of a Lease
In today’s evolving workplace environment, many businesses find themselves with more office space than they need while still in the middle of a lease. We know that this can be a painful use of capital and want to share a few of the strategies available to potentially help offset this overhead.
Here are four strategies to consider:
Sublease Your Space
If you have unused office space, subleasing to a third party can help offset costs. Many businesses are looking for immediate short-term solutions to their own space needs and your space could be a potential solution for them. The current build out of your space and the remaining lease term are an opportunity or limitation of this strategy. However, businesses that find a suitable sublease tenant can recover anywhere from 40-80% of total occupancy costs. This option requires that your lease language allows subleasing and if there’s demand for office space in your area.
Downsize and Extend Your Lease
Many landlords are open to renegotiating lease terms, especially if it means securing a long-term tenant. If you need less space, you may be able to reduce your square footage in exchange for a lease extension. As part of this extension, you may also secure a construction allowance to alter the space you will retain to meet the smaller footprint requirements. This can be a win-win: your business lowers its footprint and associated costs while the landlord retains a paying tenant for a longer period.
Negotiate a Lease Buyout
A lease buyout involves negotiating with your landlord to pay a lump sum in exchange for an early termination. While this option requires significant capital, it can be a smart move for businesses looking to cut long-term costs and free up financial resources. Be aware that many building owners would rather maintain the occupancy in their building than take the lump sum for a variety of reasons that can be frustrating. While this can be difficult to achieve acceptable terms, it’s worth a conversation with your landlord because sometimes they have motivations you may not be aware of—like the ability to sell the building to another tenant who may want to own and occupy the building.
Consider Offering a Portion of Your Office as Coworking Space
If the options above are not viable for your company, you could also consider monetizing unused areas by subleasing desks or private offices to freelancers, startups, or remote teams. This isn’t the most popular option of those mentioned but in certain cases it can be effective in minimizing some of the pain of unused space and allow you to explore relationships with people that you may be considering for permanent hire or temporary consulting work with your company.
Finding the right strategy depends on your lease terms, financial flexibility, and business needs. Whether you sublease, buy out your lease, downsize, or explore shared workspace options, eliminating excess office space can take some pain away from an otherwise costly circumstance.
Are you facing an excess of unused space in the middle of your lease? Contact Rokos Advisors today to find the ideal solution for you and your space.
Rokos Advisors is an award-winning Minneapolis - St. Paul based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.