Earlier in 2016, we got a call from a business contact who had leased space from a company that they were supplying services for. It was suggested that the future supplier lease from the client/company they were providing services for. The thought was it would be easier for all of them, allowing them to work closely. When they first entered into this agreement the office leasing rates were very high. Plus, they had the usual .50/s.f. annual increases. Whether or not there were any negotiations on the rate is unclear. Shortly after renewing their lease for another five years, the client/landlord no longer needed their tenants’ services. Losing a major client was difficult for the vendor, but fortunately they had other business and just needed to downsize the space or sublease it.
We were called in to assist with a sublease. Before meeting with the tenant, I asked for a copy of the lease to review the language on their rights to sublease. What I wasn’t expecting was to find they were paying $8.00/s.f. over the market rate for their space. The building they were in had a high vacancy rate. While they had the right to sublease, the cost of subsidizing the rent down to market was more than enough to give any one a migraine. My clients often become friends and letting her know the situation was painful for both of us.
Had she simply asked us to help her on a consulted basis originally, we could have saved her thousands of dollars on both transactions. In the end, she had to go back to her client/landlord and work out a settlement. It gave her a migraine for sure. At Compass Commercial, not only do we help clients find space and renew their leases, we also offer consulting to help in these more unusual situations and guide clients in the right direction.