Top Tips for Negotiating Commercial Leases - #13 Subleases can Save a Bundle

By
Commercial Real Estate Agent with REATA Commercial Realty, Inc. Texas 537349

Want to save a bundle on your next office lease? Try to find a sublease. Subleases are often priced 20-50% below what the landlord is charging for direct leases. So a building charging $20.00 may have subleases in the range of $10.00 to $16.00. The closer you get to the expiration date of the sublease, the lower the price goes. 

Other factors affecting the rental rate will include how long the space has been on the market and whether furniture and equipment are available for the subtenant. Many subleases have furniture, phone systems, equipment, and maybe even art and plants in place already. While the tenant (sublessor) will try to sell these things, the subtenant will almost always ask that it all be given to the them for free as part of the deal. 

But there are a few risks of taking a sublease. First, if the primary tenant stops paying the rent and the landlord terminates the lease, the sublease will likely be terminated as well. You may not have an office. So you need to underwrite the credit and financial situation of the primary tenant. The landlord could allow you to stay and just pay the subrent to him. Or the landlord could say you can stay only if you start paying the rate he is quoting for leases in the building.

Second, you usually won't get any money for improvements to the space. So you have to find space which is already configured in a way that works for you. You might negotiate for improvements or decide to pay for them yourself, but the landlord must approve that work first.

Third, you typically won't get a renewal option, termination option or any other kind of option. Options often are "personal" to the primary tenant and can't be extended to a subtenant. If you must have those things, you need to negotiate for them and be sure the landlord agrees to give you that right. That's not easy to get unless the landlord feels like they are getting something by having a subtenant in place.

Subleases can be really great for the bottom line, but be sure you know the risks. 

To see the excess space our clients have on the market, please go to the Properties page of my website. We have one in Dallas and one in Plano right now. We have a new listing for sale coming up in Rowlett shortly.

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_________________________________________________________________________

Bob Gibbons

REATA Commercial Realty, Inc. | 1211 E. 15th Street, Plano, TX  75074

972-468-1946 p | 866-439-8015 f | 972-984-8580 m

bob@texastenantrep.com | www.TexasTenantRep.com

 

 

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