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Short Term Office Subleases

I enjoy finding subleases for my clients' many reasons. A sublease isn't right for every tenant but if you are a business that is looking for a cheaper alternative a sublease could be a fit for you.



There are risks with a sublease. I think the most obvious is a default on the master lease by the sublessor. If they fail to pay the rent your sublease has evaporated. Yesterday I found a perfect sublease for a client. It has furniture, networking, and the design that they need. I checked with the Landlord and discovered that the tenant is delinquent on their rent. Obviously, this is a risky sublease for my client


Now for the great news! Many subleases are backed by tenants that are successful and are leaving their lease for several reasonable reasons:

  • Outgrew the space

  • Relocating their office to a new market

  • Change in business plans

  • Relocating their office to a new market

These are some of the reasons that make subleases available in the office space market.


One of my clients is the king of the sublease. Every office space he has occupied for the past six years is a sublease. I know when his sublease is expiring and I begin searching for the ideal space six months prior to the expiration date.


When I look for subleases the best square footage is from 3,500 - 24,000 square feet. I say this because there are usually more options in the size of space. Unfortunately, the smaller spaces tend to have tenants that are not as financially strong and they will default on their lease resulting in no sublease opportunities. The smaller subleases are still possible to find but the choices are limited.


Presently I am working with a client to locate a Plano office sublease. The market is very strong with a lot of demand for office space. As soon as a quality sublease space appears it is taken. There are a few Plano office subleases that are available but they have issues that reduce their attractiveness. Many of them have four or five-year terms and my client is looking for a short term sublease.


Sometimes I get calls from people needing a single office or possibly two offices. They typically want a very short term lease, usually six months to a year in the term. They want a sublease because the rent is less expensive. The advice I give to these clients is to look at executive suites or co-working spaces.


Some of the Advantages and Disadvantages of Office Subleasing


Advantages

Lower Monthly Expense: The sublessor generally will gratefully accept a sublease where the sublessee mitigates a portion of their office rental expense. This gives the sublessee a lower rental rate.


Short Term: In many cases, the sublessee will get a shorter term sublease. If they deal directly with a landlord they generally are looking at a three to a five-year lease term.


Furniture and Equipment: Often a sublessee will have access and use of the sublessor's furniture, phone system, copy machines, and network. This perk can save a subtenant thousands of dollars in upfront expense.


First Advantage: When the sublease is expiring it is common for a landlord to offer the subtenant an opportunity to have a direct lease with them when the sublease expires.


Disadvantages

Sublessee isn't the landlord's tenant: When a company subleases a space they are usually required to sign a landlord's consent document that will spell out the sublessees rights. It is normal that the sublessee is being allowed to occupy the space as long as they don't violate any provisions in the lease and that the true tensnt, the sublessor doesn't violate any terms or conditions of the lease. If the sublessor breaches the terms of the lease and defaults the sublessee will be forced to vacate the space. This is why it is important to not only like the space and the terms of the sublease. You also need to make certain that the sublessor is financially strong enough to make their required payments to the landlord.


As-Is Space: Because the rent is lower it is unusual for a sublessor to modify the space and the landlord certainly will not. So a sublessee needs to know that the space they see will be the space they occupy unless they want to spend their own money to make modifications after they receive landlord approval.


Sticker Shock: Be prepared to be like my sublease client. If you want to keep lower sublease rates you must be willing to move to the next sublease. The downside is that this will require you to move frequently. Generally, every one to two years unless you are looking at a larger sublease, which tends to have a longer term.


Landlord Contact: Many landlords will place a sublease clause in their leases. In the clause, they insert language that precluded a tenant from subleasing space to a tenant that a landlord is talking to about space. So if you talk to the landlord and then find a sublease space the landlord may not approve the sublease.


If you would like more information about office subleases in Dallas, Plano, Frisco, Allen McKinney or Richardson contact us. We review available subleases on a daily bases for these markets and we get many flyers from brokers about new office sublease listings.

















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