Ensure an 'exit strategy' for your current lease.

• Author: Heffes, Ellen M.
• Position: STRATEGY

In commercial real estate markets like the current one, tenants can materially reduce their long-term occupancy costs. Increased supply, diminished demand and distressed properties are making landlords eager to retain tenancies in their buildings. We're in the midst of a tenant's market where virtually everything in a lease is negotiable, including an exit strategy--terms with which you can relinquish all or part of your space. This is a necessary safeguard given the uncertain economy and unforeseen challenges.

During boom times, tenants are focused on obtaining options to renew their lease, secure expansion space or purchase their buildings. Though exit strategies should always be incorporated into proper real estate decision-making no matter what the economic climate, they often take a back seat to options that support growth.

[ILLUSTRATION OMITTED]

Furthermore, obtaining contraction and termination rights during prosperous times and tight office markets can be more difficult to secure, as commercial markets are then often tipped in favor of landlords.

One way to plan an exit strategy is to negotiate into a lease a "kick-out" or cancellation provision allowing a tenant to walk away from its space at a predetermined point, provided it complies with...