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What you need to know about office subleases in LA

December 21, 2020 | by Viveka Krishnaswamy
Reviewed by real estate expert Michael Colacino

The Los Angeles, CA office space market has recently seen a significant uptick in the number of office subleases for rent, with approximately 2 million square feet of space having become available to prospective office tenants since the start of the pandemic. Most of this space can be found in high-demand West L.A. neighborhoods, such as Santa Monica.

The reason for this uptick? LA-based companies that have opted to continue working from home are looking to offset their rental costs by temporarily subletting their offices until they are ready to go back to the office. If you’re a commercial tenant in LA, you may be wondering what the benefits of either subleasing your office space or renting an office sublease are, and what the sublease process entails. We’ve put together what Los Angeles-based companies need to know about office space subleases.

What are the benefits of renting an office sublease in Los Angeles?

Looking for an office space? You may be wondering: What are the benefits of renting one of these LA office subleases on the market? Here are just a few of the reasons why your business may want to look into renting an office sublease:

  • They’re often cheaper than a direct lease: Sublessors are often looking to reduce their costs as quickly as possible, so subtenants can often get sublease space at a discounted price. For LA businesses that aren’t able to afford a high-priced direct lease outright, such as startups or small businesses, subleasing can be a great option to get more bang for their buck than they’d typically be able to on a market-rate, traditional space.
  • They’re generally fully-furnished and wired: Oftentimes, sublessors will leave their furniture and infrastructure intact in the office they’re subleasing, providing a turnkey experience for subtenants and allowing them to avoid the costs associated with fitting out an office space. This isn’t necessarily the case, however, so make sure to determine whether an office is fully fitted out or not.
  • You can negotiate a flexible term: While most landlords aren’t willing to agree to a lease term under 3 years, you’ll have more negotiating power with a tenant who just wants to recoup costs as soon as possible. Additionally, even if you were to sublease a space for the rest of the sublessor’s total lease term, this will typically be a significantly shorter period of time than a typical lease term.

However, there are a few cons to be aware of. For example, if your sublessor defaults on rent payments to the landlord, your business will face consequences. Additionally, there may be unfavorable lease terms that sublessors try to pass onto you. It’s important to do your due diligence in order to make sure you’re signing a fair agreement with a trustworthy company. Have a tenant broker who specializes in Los Angeles commercial real estate represent you to make sure that you avoid such risks.

What do I need to know before subleasing my Los Angeles office space?

Wondering whether you should join the ranks of Los Angeles-based businesses looking to sublease their office spaces? Here are a few things you’ll need to know before listing your space.

  • It’s a good option if you have excess space, or if you need to move offices: If you’re not using all of your space, or even just a portion of it, you can sublease out the space that isn’t in use. (Keep in mind that if you go with a shared office setup, you’re subject to compromised privacy and a new office environment.) If you’re looking to move offices or get rid of a downtown office in favor of satellite offices around the LA metro area, subleasing can be a great option as well.
  • It’s best to offer your space at a discounted rate: One of the most attractive features of an office sublease is that prospective tenants are often able to pay less than market rate for a given space. In order to make yourself competitive on the office sublease market, you’ll likely want to discount the asking rent when you put your space up for sublease. A tenant broker can advise you on the best way to price your space.
  • You’ll need to check if your landlord allows subleasing: Not all landlords permit office subleasing, so make sure that you have permissions to do so before listing your space.
  • You’re on the hook for rent — and for any damage: Your subtenant pays you, and you pay your landlord the rent. Because you’re still the party that’s contractually responsible for the space, you’re still on the hook for rent if your subtenant doesn’t pay. Additionally, if the sublessor declines to reimburse you for any damage caused during their subtenancy, you’ll be responsible for that as well.

If you choose to pursue an office sublease as either a sublessor or a subtenant, it’s important to have a Los Angeles-based commercial real estate broker by your side to help you navigate the ins and outs of the process. Contact us for more information and assistance with subleasing in LA.

Tagged: Around LA

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