As companies negotiate their lease agreements they often plan on occupying the office space for the complete lease term. Unfortunately, the best plans don't always work out. Sometime a company may downsize or even outgrow their space before the lease term expires.
In order to avoid breaking the lease, a tenant may consider subleasing their office space. By subleasing the office space a company may avoid termination fees and offset some or all of the expense of the lease without defaulting on its obligations.
If your business is facing a situation where the lease that was signed a few years ago isn't working today the sublease option could work for you. What are legitimate reasons to consider a sublease?
Outgrown the Space: When your business suffers because you no longer have enough room it is time to move. When you have some term left on your existing lease then a good solution is to sublease your former space so you can relocate to a large office.
Downsizing: Unfortunately sometimes there are changes to a companies plans and a corporate office may move a department out of an office to another location. Now you are looking at rows of empty offices. In this case, a sublease can offset the expense of the lease and infuse extra cash into the company.
Talent Pool: Demographics are constantly changing. If your employee base in no longer close to your office it may be time to relocate. If you have a year or more left on the lease a sublease is a wise move to reduce your expenses and allow you to relocate to where the talent is relocating.
As with everything there are good and bad results from every action. It is important to know what they are when it comes to subleases.
Reduce rental expense
Reduce square footage
Closing an office
Upgrade office space
If the subtenant defaults you are still responsible for the lease
Subtenant damages space
No leasing for a high enough amount to offset total rent
Partial sublease space of poor quality
Landlord won't approve the sublease
Subtenant defaults on the sublease
Subtenant requires construction
If you have decide to sublease your office space you need information. What is the best way to begin the process?
1. The sublease process actually began when you executed your lease agreement. At that time you should have read your lease and studied the sublease clause to determine what rights were given to you to sublease your space. Sometimes landlords will prohibit your right to sublease space. If this is the case you will need to seek legal counsel to determine if you have the ability to sublease.
If you have a lease that gives you the right to sublease your first step should be to meet with your landlord and let them know you are going to sublease all or part of your space. Sometimes you can be lucky and the landlord may have recently had a call from a company that would be interested in your office space.
2. You need to understand what your subtenant is looking for in a sublease.
Generally, they are looking for:
Short term lease
Below market rental rate
Office furniture and data communications systems included
It is important to know this when you are about to market your property because it is unusual to have a subtenant that doesn't possess all or some of these qualities.
Also, be aware that the landlord may have placed sublease restrictions in your lease that prohibits you from subleasing to any tenant in the building or and prospective tenant they are working with to lease space.
3. You must decide if you are going to market the space yourself or hire a professional office broker to help you get the space leased. If you choose to take the task on for yourself you will need to:
Know the office market and competition
List the space on all the real estate databases
Prepare marketing flyers
Communicate with the brokerage community on a regular bases
Canvas and cold call on the tenants in your market
Be available to show the space
Negotiate the sublease
Communicate with the Landlord
Acquire landlord consent to the sublease
If you hire a qualified office broker they will do all of the above and also help you with any paperwork that will be required. If you are curious and would like to know more contact us and we will go into detail with you about our sublease service. You will see the benefits of working with us to sublease your office space.