Everything You Need to Know to Sublease Office Space in 2018
Traditionally, businesses obtain office space through a lease—that is, signing an agreement with a landlord to rent for a specific amount of time at an agreed-upon price. However, that’s not the only way to obtain workspace for your business. If you’re looking for a potentially quicker, cheaper way to find office space, squatting in the local Starbucks or hosting meetings at the library aren’t you’re only options. You can also look for a space to sublease from another business.
What is an office sublease? Subleasing means renting office space from a tenant who holds a lease to the property, instead of renting directly from the landlord. In this scenario, you’re called the subtenant, and the current tenant is called the sublessor. The agreement you sign with the sublessor would dictate your rights and responsibilities as a subtenant, and you would make rental payments directly to the sublessor. Subleasing can be a helpful solution, especially for small companies and startups. However, there are downsides as well. Let’s examine some benefits and concerns for going this route.
Benefits of an Office Sublease
Before taking the leap to lease a space directly from a landlord, consider subleasing from a sublessor. This arrangement could turn out to be very beneficial for your business!
- Subleasing is generally more affordable: Office subleases are often cheaper than a standard lease between you and a landlord. In fact, savings can range between 15% to 40% under typical vacant office market rates. Also, you can rent only as much space as you need. If you just want to rent two offices for your startup, you’ll have a much easier time subleasing than finding a landlord who wants to lease you just two rooms out of a whole building.
- Turnkey ready: The sublessor has probably already made necessary repairs to the space so that you don’t have to. Additionally, the space is probably already outfitted with phone lines, furniture, heat/electricity, Wifi, etc.
- Free amenities: You will likely have access to free fire alarm systems and Wi-Fi. With some negotiations and maybe a small additional fee, you might get to use the sublessor’s printers pantry, and other office amenities. If the sublessor already has administrative assistants in place, paying a small fee to have them answer your calls might be cheaper than hiring an office manager of your own, depending on your business needs.
- Shorter Leases: Most landlords require tenants to sign a lease for at least three years. If you’re looking for a short-term agreement because of unpredictable business growth and profits or because you just need to rent space for a little while until you can afford something better, subleasing is a great option. You can find subleases for a year or even just a few months.
Risks of an Office Sublease
Though subleasing might seem cheaper, faster, and easier, it’s not the best option for everyone. Before signing a sublease keep the following factors in mind to make sure you’re creating a fruitful situation for your business.
- It takes time to sublease office space. A sublease might offer a shorter term, but finding one, negotiating the details and renovating the space to your specifications (known as the “build-out”) still takes time. Closing on a sublease might take three months. Add an additional two or three months for the build-out, and it could be six months before you move.
- You need to review the sublease and the original lease. Entering into a sublease means working off of the existing commercial lease—one that you didn’t negotiate—between the principal tenant and the landlord. Be sure that you review the original lease and the sublease—or, even better, hire an attorney to review. You will probably have to accept the contract and the space “as is,” meaning you will likely be unable to make improvements or changes to the office space.
- Accept the potential downsides of using space that isn’t private. If the sublessor is working in the space as well, keep in mind you’ll have to deal with their visitors, noise, outdoor signage, advertisements, and more. Visitors may get a small business vibe when they drop by if the character of the atmosphere is totally different from what your company stands for. The best way to avoid problems with this is to rent from a sublessor in a similar industry.
- Property damage disputes get messy. Another complication that could arise for your sublet is the issue of property damage. Depending on the nature of the sublease, you might have to cover a security deposit, often a portion of the original deposit or a separate agreement between you and the landlord. Either way, if you don’t assess any damages before moving into an office sublet, you could be stuck paying for the nicks caused by someone else.
- You may not be able to renew. While shorter lease terms may be a positive point for some subtenants, the inability to renew may also be a concern. The sublessor may choose not to renew your lease, and you would be forced to move out and find a new space to rent, possibly under short notice.
- Find out why the tenant is subleasing. Last but not least, it’s a very good idea to find out why the sublessor is subleasing their space. Have they fallen on hard times and need to offset costs? Are they facing some legal woes? Or are they simply sitting on a surplus of square footage? The more you know about the lessor’s stability as a tenant, the less you’ll have to wonder about moving again on short notice.
So, Should You Sublease Office Space?
When deciding whether or not to sublease office space from a sublessor, you have a lot to consider first. The above benefits and concerns should give you a good starting point. Overall, our advice can be summed up with three short reminders: ask the sublessor lots of questions, examine the office space to make sure it’s what you’re looking for, and ask an attorney to scrutinize both the lease and the sublease before you move forward signing anything.
If you’d rather not deal with the hassle and have an office space to call your own, contact us today and we’ll get you paired with a licensed tenant broker to find the office space your company deserves. Tenant brokers are industry and market experts that can negotiate with landlords on your behalf, ensuring you get the best price in a location you’re excited about.
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