Could there be a topic in the corporate real estate that is talked about less than an exit strategy?
As a broker that has been on the receiving end of more than a few, “We have to get out of our lease,” calls, I know that a little bit of planning will go a long way towards avoiding a major headache later. Here are three things to consider about an exit strategy when negotiating your lease.
1. Does your business plan horizon match your lease term? Don’t sign a 7 year lease if you only have a 3 year business plan! I have a client that only does 2 year subleases. His business is building up a piece of technology and selling it. He doesn’t want to get stuck with a long lease after the technology has been divested.
2. If you’re signing a long-term lease, negotiate a buyout at some point during the term. It might be expensive, but it’s better than carrying a lease to the natural maturity. I recently used a termination right to leverage an expansion option for a growing tenant.
3. Design the space to easily demise. If you’re taking a large block of space, make it easy to divide so you can sublease a portion or the whole thing. We just moved a financial services company into a full floor. We purpose-built the floor to accommodate demising just in case they didn’t meet their growth projections.