Your Space Disposition Options

There are usually four reasons to get rid of space. Some spaces are more than you need, some are less than you need, some are fine but too expensive, and others might be perfect in every way, but might also be sub-optimal uses of your company's capital. In every case, There are solutions to help your business get the right space, held in the right way.

Space Disposition Options for Moving

When a space doesn't serve your needs or is priced outside of the market, moving might be the best option. Before moving, work with your tenant rep to see if your landlord can adjust your leas terms, give you less space or give you more space. If your space is generally a good one, it's probably worth trying to fix.

If your current space can't be fixed and you have an existing lease or own the space, you usually have three options. First, you can pay your landlord to let you out of your lease. This space disposition option might be expensive, since you could end up paying as much as the net present value of all of your future lease payments today, but it gets you away from being responsible for the space in the future..

A more affordable option is to attempt to sublease out the space. When you do this, you vacate the premises and try to find another tenant. That tenant pays you rent, and you use their rent to pay your landlord. A full service tenant representative firm can help you to do this.

If you own the building and are done using it, you have two space disposition options. One option is to sell it, which means putting it on the market and waiting for a buyer to take it off of your hands. Depending on the building type, location and your price target, this option could take anywhere from months to years. Another option is to retain the building and have your commercial real estate broker look for a tenant to pay you rent. While you might not be in the commercial real estate business, this can be a way to take an otherwise non-performing asset and generate some cash flow.

An Option for Staying

If you want to stay, you might still choose to dispose of the space. Many tenants are turning to an ownership structure called a sale-leaseback. In this structure, you sell the building to an investor and immediately lease it back, usually on a long-term lease.

In a sale leaseback you get the key benefits of ownership in that you get to stay in the building and use it. At the same time, you get the benefits of tenancy. When your lease expires some day, you can leave if you want to. You also don't have your money tied up in a building. This space disposition option is popular among tenants who are expanding and need to keep capital free for future growth