Letter of Intent (LOI): NYC Office Leasing, Explained

How an LOI works in a New York office lease

Once tours narrow to a floor worth chasing, we put the offer in writing: base rent, term, free rent, the improvement allowance or landlord's work, security, delivery condition, and a commencement date. The landlord counters, the numbers converge over a few rounds, and the signed result is the letter of intent, a few pages that read like a deal memo rather than a contract.

The lease itself is then drafted on the landlord's own form, so the landlord's attorney writes the first draft and your side marks it up. The LOI keeps that markup from becoming a second negotiation: most of its language is not legally binding, but a landlord who signed the economics rarely retrades them in drafts, because the LOI stands as the written record of the deal. Confidentiality and exclusivity paragraphs are frequently drafted to bind both sides, so confirm their reach on the specific document before anyone signs.

A worked example at the citywide median

Take a floor asking $72 per square foot per year, the citywide median on our book. The opening offer goes in below the ask, paired with free rent measured in months and an allowance sized to the planned buildout. The landlord counters closer to asking but concedes on the package, and within a few rounds the signed LOI lands where both sides can defend it.

The arithmetic makes those rounds matter. A dollar per square foot repeats across every rentable foot for every year of the term, so a move that looks small against a $72 ask compounds into serious money over a multi-year commitment. That leverage lasts only while the deal is a memo.

What is negotiable, and what we push on

Nearly everything in the document is negotiable. We push hardest on the terms that are cheap for a landlord to concede now and expensive to win later:

• Base rent and the escalation structure, spelled out rather than left as a formula to be drafted.
• Free rent, both how many months and where they sit in the term.
• The improvement allowance or landlord's work, tied to a defined delivery condition.
• Security: the deposit size, whether a letter of credit is accepted, and a burn-down that shrinks it as you perform.
• The forward-looking options, meaning renewal, expansion where the building can offer it, and rights to sublease or assign.

The traps that cost tenants money

The expensive mistakes here are mostly omissions. A vague delivery condition hands the landlord the argument over what you accepted. An escalation described as market and never defined becomes whatever the first lease draft says. Silence on the operating expense and tax base years means those numbers get set in drafting, where your leverage is weakest.

The binding provisions cut the other way. An exclusivity or no-shop clause that quietly commits you to one landlord takes your best card, the credible alternative, off the table, so we scope those tightly or strike them. Treating the LOI casually because it is non-binding is the slowest trap: every ambiguity left in it resurfaces as a lawyered argument in the lease drafts. The document is short because the thinking behind it should not be.