Office Downsizing Mid-Lease: You Can't Shrink the Obligation

Your Actual Exposure: $175,000

A $8,000/mo general lease doesn't create $8,000/mo in liability. It creates $175,000 in total exposure across rent, personal guaranty, restoration, and every other clause your landlord drafted to protect themselves — not you.

Where $175,000 Comes From

What Most People Miss

The sublease income gap. If you sublease excess space at a rate below your lease rate, you cover some cost but not all — and you're still liable to the master landlord if the subtenant doesn't pay.

Key Risks in This Scenario

• No unilateral right to reduce space unless negotiated upfront
• Sublease of partial space requires landlord consent and creates sublease liability
• Paying for unused space while also paying for new smaller space doubles real estate costs

How to Reduce Your Exposure

• Negotiate a contraction option: right to return a defined portion of space at year 3 with 6 months notice
• Negotiate a landlord buyout of excess space if the landlord has a prospect for that square footage

Frequently Asked Questions

What is a contraction option in a commercial lease?

A contraction option lets you return a portion of your leased space at a specified point in the lease term, typically with 6-12 months notice and a fee. It's valuable insurance against downsizing needs.

Can I sublease half my office space?

With landlord consent, yes. Partial sublease lets you recover some rent cost. Your exposure: you remain liable for the full lease even if the subtenant defaults.

What does it cost to sublease part of my office?

Subleasing costs include broker commission (5-10% of sublease value), tenant improvement for the sublet space ($15-30/sq ft), and legal fees for the sublease agreement ($1,500-$3,000).

Can I negotiate a lease termination if the building owner wants the space back?

Yes. If the landlord has a prospect for the space, they may negotiate a termination buyout — you pay a lump sum in exchange for lease release. This is often cheaper than 3 years of wasted rent.

What is a recapture provision?

A landlord recapture right lets the landlord take back space you want to sublease and re-lease it directly to the subtenant. This frees you from the sublease obligation but also ends your lease on that portion.