Office Lease Closing, Termination, or Surrender in New York City
As many readers of our emails and blog are aware, at Shenwick & Associates we are helping many small businesses close, terminate or surrender their office leases in New York.
As a result of the cooling labor market, many industry experts predicted employers would have more leverage to force their employees back to work. However, with the recession and troubled economy in New York City, we are seeing more and more small businesses close their offices and surrender, abandon or terminate their leases to cut costs.
A recent study by a Columbia business professor stated that to provide a seat for an employee in Manhattan costs the employer $16,000 per year. It is important to note that the Columbia business professor referred to a "seat" rather than an "office". Providing an office for every employee would cost substantially more than $16,000 per year.
We were recently retained by a small garment center company that was struggling and wanted to move to a remote work structure to save business and money. The facts of the case are interesting and illustrative: the company owed $65,000 in rent and additional rent to its landlord. For them to be released from the guaranty, they needed to give the landlord three months notice and be current on their rent (total amount owed to landlord over $100,000).
Jim Shenwick, Esq. was retained by the company and we reviewed the commercial lease, the guaranty, the financials' for the company and the guarantor.
We formulated a strategy and negotiated a very favorable deal for our client.
As part of the agreement, the tenant vacated the space quickly, abandoned its buildout to the landlord, forfeited its security deposit, and paid the landlord $25,000. The landlord agreed to release the company and the guarantor.
The result was a "win/win" for all parties, the landlord obtained possession of its space quickly without incurring legal fees and court costs, the company saved approximately $75,000 in rent payments and the guarantor was not sued and did not have to file for bankruptcy.
Jim Shenwick, Esq has experience in commercial leasing, workouts and bankruptcy and clients can contact him at 212 541 6224 or firstname.lastname@example.org
Excerpts from the Elon Musk story are below.
Elon Musk, who was a skeptic of the benefits of remote work, recently announced that he was closing the Twitter offices in Seattle. The Seattle Times had a fascinating article about musk's move, the article can be found at https://www.seattletimes.com/opinion/musks-about-face-on-remote-work-shows-its-value-in-recession/
The article stated in part that "As part of ongoing cost-cutting measures under new owner and CEO Elon Musk, Twitter is shutting down its Seattle offices and instructing employees to work remotely. That’s despite Musk earlier claiming that remote workers are only “pretending to work” and banning remote work at Twitter upon taking it over in early November.
So what explains his change of heart? Apparently, it’s the costs associated with the company’s Seattle office: rent and services such as cleaning and security.
The fact that Musk — an extreme skeptic of remote work — acknowledged its cost-cutting benefits illustrates the future of remote work for the U.S. economy. It highlights the misleading nature of many headlines about how an impending recession would lead to the end of remote work.
They claim that a cooling labor market will give executives more control to require employees to return to the office. That’s because many employees prefer to work remotely and most executives want their employees in the office.
However, the reality is much more complex. Of course it’s true that during a recession, employers have more leverage. At the same time, executives need to focus on maximizing the return on investment from their employees.
In times of economic growth, executives have more freedom to make decisions based on their personal preferences and intuitions. But during a recession, they may need to hunker down, be more disciplined, and rely on data to make decisions that make the most financial sense for the company — like Musk choosing to have Twitter staff work remotely for the sake of cutting costs. This focus on profitability over personal preferences benefits remote work."
Jim Shenwick, Esq email@example.com 212541 6224