Why Length of Lease Matters

The simple answer is the cost of the construction.  To build out a brand-new office space costs the Landlord anywhere from $100 – $150 per sq ft depending on pre-construction condition and quality of finishes that the Landlord elects to use.  

➡️ For more insights into how deal economics impact NYC leases, check out Deal Economics in a NYC Lease: What You Need to Know.

If a tenant is looking for a brand-new custom-built space, a landlord is going to need a longer-term deal 7-10 to amortize the cost of the work.  (Usually the landlords will want 10, but will often negotiate for less)

➡️ To understand why longer leases are preferred for custom-built spaces, read The Strength of Manhattan’s “Better Buildings” in the Midtown Core.

Of course, not all tenants want a long-term lease.  Landlords will often pre-build spaces in a generic manner with the intent of releasing that same space 2 or 3 times.  This way a landlord can get that same 10 plus years out of their investment.  Those spaces can be leased for 5 years and sometimes less.  A 2nd generation pre-built space a landlord will typically be much more flexible on the term provided they don’t have to perform much work. 

➡️ For tenants considering shorter-term leases or flexible options, explore Direct Lease vs. Sublease: Weighing the Pros and Cons in NYC’s Office Market.

For tenants looking for maximum flexibility there are many co-working spaces throughout New York City that offer a fully furnished turnkey solution with use of conference rooms and other office services.  

➡️ To learn about flexible leasing options and coworking solutions, see Finding the Perfect Office Space in New York City.

I would be delighted to discuss the various options.  

I can be reached at Paul.Walker@cbre.com or 212-984-7117