Is a Sublease a Better Bet for Your Next Office Space?
Last Updated on August 30, 2022 by
Many businesses are discovering (or rediscovering) the idea of commercial sublease arrangements in a post-COVID-19 economy. This is opening up opportunities not only for those businesses, but also for the organizations advertising subleased spaces on the open market.
So what makes subleasing so attractive? Unlike a traditional lease, a sublease usually offers quite a bit of variety. You could potentially lease anything from a generous, fully furnished space right down to a single desk on demand. Plus, you might not be locked into a long-term commitment, which can be highly advantageous.
For instance, let’s say you’re working on a startup. You’re projecting growth over the next two years, but you don’t want to burden yourself with a lengthy lease. In another scenario, you have a consulting company and just need a bit of project-based space. In either case, a sublease could allow you to get what you need for an affordable price. After all, many businesses that try to offload sublease space are eager to move it — so you can certainly drive favorable rates. As a bonus, you might even find a location that affords luxuries (such as in-place furniture) and equipment that was already paid for.
Of course, you shouldn’t jump into subleasing without making sure a sublease aligns with the operational needs of your corporate goals and culture. At the same time, now is a terrific time to investigate the subleasing market. As of the beginning of 2021, more than 11 million feet of sublease space vacancies was ready to rent. That’s a sizable amount of real estate that you probably won’t want to ignore.
The Benefits of Sublease Arrangements
As you’re weighing the “sublease versus lease” decision, you’ll want to consider all the upsides and realities that go along with acommercial sublease agreement. Here are a few to consider:
1. Flexibility.
Perhaps you want to establish a presence in a market before expanding, or maybe you’re toying around with the idea of opening a regional satellite office and want to start small to test the recruiting waters. Alternatively, you might have snagged a lucrative project and want to temporarily relocate to be conveniently located near your top customer.
In any of these situations, subleasing allows you to avoid being tied down to a lengthy lease and follow your unique forecasted business growth. That means you can explore novel concepts or investigate different markets both faster and with less risk. Really, the variety of subleased space available allows you to create the workplace atmospheres you want — no matter what your preferred floor plan or arrangement looks like.
2. As-is condition.
In many subleases, the space might come partially or fully furnished thanks to the current lease owners who just want to unload the space. This could include everything from wiring to fixtures. You may be able to move in quickly and avoid capital expenditures (such as paying for equipment, furniture, and lighting).
And don’t be surprised if your interior design creativity is ignited as you look at a flexible working office space that’s furnished. Unexpected inspiration is common as you begin to tour available built-out sublease commercial spaces, whether that’s in person or virtually.
3. Cost.
Want to reduce your upfront capital expenditures? Subleases tend to be more affordable than a standard lease. In ashared office spacesituation, you might be able to cut costs even deeper by sharing the cost of internet providers or phone services. However, you’ll still have a beautifully maintained space given that most buildings still have enhanced workplace safety cleaning protocols.
Another cost-saving factor related to entering anycommercial real estate sublease agreementis that you can usually get a terrific deal on the rent. As long as you don’t need the space for more than two or three years, you can expect to save each month.
4. Speed.
Turnkey is the name of the game when it comes to subleases. When you want to move into a place quickly and only stay there for a handful of seasons, subleasing allows you to bypass the need to negotiate a traditional lease or meet strict pro formas.
Because the sublease is generally subordinate to the master lease, many of the lease terms have already gone through the negotiation process by the existing tenant and landlord. Just be sure you know what they are before signing on as a sublessor. Then, sign on the dotted line and get up to operational status at lightning speed.
No matter what industry you’re in, you can probably find a commercial sublease space that meets your business objectives. It’s worth exploring the possibility prior to locking yourself into a longer lease that might not afford you the fluidity you need to pivot, scale, and disrupt.
Curious about how your team can leverage a lease administration tool to manage your leases and subleases? Feel free to request a demo, and our team will be happy to help find a tech solution specific to your business needs.
Want to learn more tactics for taking control of your real estate as well? Check out our “Ultimate Guide to Corporate Real Estate Strategy,” or visit our lease accounting compliance resources page.
