Office leases can be broken into two primary types: Direct leases and subleases. Direct leases are leases that are made with the prime landlord of the property; whereas, subleases you are leasing the space from a tenant in the building and not the prime landlord. Subleasing isn’t the right option for everyone, but it can have real benefits, which are worth exploring if your company is looking for office space.
One of the biggest potential benefits of subleasing office space, is that you can get below market rates. Companies that are looking to sublease space are looking to recoup money they are spending on their own lease, and are often willing to accept less than they are paying to get it filled. Depending on how aggressively the company is looking for a subtenant, the savings over the market rate can be substantial.
Subleased space is often completely built out, so you don’t need to do anything more than move into the space. Subleased office space typically furnished, and comes with wiring, phone systems, internet, and every other component that is part of a build-out up and running. This is extremely advantageous to businesses that lack the money to spend up-front to build out and furnish a raw office space.
While the particulars of direct leases can vary substantially, the overall contours of these leases are generally similar. Landlords typically require 10 year leases, and it can be hard to find space if you are looking for a shorter lease term. This rigidity is not found when subleasing, and you can get much more flexible terms on a sublease.
For small businesses looking to rent office space, the security deposit can be a big obstacle. Landlords will often demand extremely large security deposits or personal guarantees, which are structured to protect the landlord in the case of a default but can prevent you from being able to lease space. Subleases are going to have lower security deposit and guarantee requirements, which makes them much more tenant friendly.
In addition to the space that you are subletting, you may also be able to have access to the amenities that the company you’re subletting from has setup. This can include conference rooms, nap rooms, kitchen areas, reception areas, and others.
While a sublease is not the right option for every business, it is a very attractive arrangement for some businesses, especially smaller, younger businesses and businesses that are looking to grow rapidly. To find out more about the benefits and drawbacks of subleasing office space, contact one of our experience commercial real estate agents.