The PivotDesk Blog

Guide to Sublease Your Office Space

You wouldn’t rent an apartment with two bedrooms and only use one of them, you’d get a roommate—so why shouldn’t the same logic extend to office space? This is exactly the rationale employed when businesses choose to sublease their offices.

A sublease occurs when a tenant who currently has a lease with a property owner decides to rent out some or all of that space to a subtenant. The practice of subleasing can prove fiscally responsible, but what exactly leads some businesses to make this leap, and how can you know if it’s a good move for you?

Businesses choose to sublease available office space for a number of reasons, the most common of which include:

  • They bit off more than they can chew and can no longer afford the price of their monthly rent
  • They find themselves paying for more space than they actually need for their business
  • They have outgrown a space more quickly than they anticipated and want to move, but still have a current lease in effect that they don’t want to break

If you’re considering subleasing some or all of your office space in NYC for these or any other reasons but aren’t confident it’s the right choice, we’re here to help. First, take stock of the four questions in this list before you dive into the world of subleasing available office space so you can know for sure that you’re making a smart business move.

  1. Will it make you money?

Some businesses may be surprised to learn that they can actually turn a profit by subleasing their unneeded space. This is particularly true if your office space is in an up and coming neighborhood and the office size is more than you can occupy; most commercial leases last for several years at a time, so an area that was less expensive two years ago could be undergoing a new period of revitalization now. Of course, you can also make money through subleasing if another business is in particular need of a space on short notice.

Do your due diligence before settling on subleasing your available space. Check on what spaces of a similar size are renting for in your area, and contrast that potential income with what you’re losing in rent each month. You can also do some research on whether properties and office space in your area seems to be in high demand, which it may be if you have an attractive “Main Street” type location or if you are in a part of the city where real estate is always in high demand. If the math works out, it’s probably a good idea to dive into subleasing. Finances are always a tough line to tow, so if giving up some extra valuable NYC office size makes them a little less tight, why not go for it?

  1. Do you have a sublessee in mind?

The process of subleasing is made much easier if you already have a sublessee that you trust on the hook. In a subleasing situation, you will usually still be responsible for any damages to the space since it is still your name on the original lease. Although you technically aren’t occupying it, you’re the only one that the landlord can hold legally accountable should anything happen to the office.

Consider whether or not you already have concrete interest in your extra spaces from someone or some group that you trust. If not, you don’t need to count yourself out of the subleasing game just yet. Since you’re subleasing a commercial space, tenants are generally more careful with the way that they treat it, and you always have the option of including a section about sublessee accountability for damages in the sublease agreement. It’s pretty unlikely that you’ll run into a situation where a business doesn’t take care of the office space they sublease from you, so while having a tenant in mind makes subleasing easier, it’s certainly not absolutely necessary.

  1. What is your relationship with your landlord like?

Landlord-tenant relationships aren’t quite as tricky as they’re made out to be, particularly in the commercial arena. Most of the time, as long as you pay your rent and respect your lease, landlords will be willing to work with you if you decide subleasing is a good move for your business. Just take note that landlords have more legal recourse than you might realize, built into a lease, so if your relationship with your landlord is less than stellar, they might be able to stand in the way of your subleasing efforts.

The reality is that most landlords who own office space in NYC are too busy to nit-pick over you making a small profit off of a sublease, particularly if you’ve always been a good tenant (it’s never to their advantage to put a reliable paying tenant on the street, when they could be cashing your rent checks instead). All of this is to say that if you and your landlord maintain a positive working relationship, you should have no reservations about taking on a sublessee!

  1. Will you still be occupying part of the space?

Assuming that you will just be subleasing some of your unused space, and not moving out of the office entirely, consider the logistics of another company moving in alongside yours, especially if they are going to be located on the same floor as you. It is important that you are able to coexist with this business that you will be sharing space with, so think through some of the issues that will inevitably arise with an office sublease, such as:

*Common areas – Will the employees or clients of the company subleasing your space also have access to all of your office common areas? Or just some of them? Areas to consider might include kitchen and break room, reception area, and meeting spaces.

*Parking spaces –  Parking spaces can sometimes be a topic of contention for offices (especially in populous New York City), so consider the parking situation at your building and how the newcomers will fit into it. Are there usually plenty of spots available for everyone, or might your subtenants have to park on the street?

*Office culture – There are also less tangible issues that you need to think about. If you have a more relaxed office culture where pets are welcome and there is often music on in the background, you may not be able to work comfortably side by side with a more formal business that values a quiet atmosphere.

These should be among the issues you address prior to finalizing the sublease. So long as you identify a sublessee with whom you find common ground, you may actually find that you enjoy the change of pace working near another team.

Subleasing Step-By-Step

Once you decide that subleasing is a shrewd move for your business, you can get down to the nitty gritty of subleasing your available office space. This process will include a number of steps. Each new deal is unique, but the following are the most common elements:

  1. Consult both your lease and your landlord to make sure subleasing is allowed. While most landlords won’t object to a sublease, you don’t want to be presumptuous. Make sure you discuss the issue with the office property owner to get their approval and to determine if they have any terms that you need to be aware of.
  2. Search for suitable tenants and develop a screening process. If you were looking for a roommate to share a home, you would employ a rigorous search process before signing a lease together, and the same goes for when you are seeking a sublessee. As you create a listing advertising your space, develop a criteria for your ideal subtenant (e.g. size of business, etc) and consider which qualities are high, medium, or low priority.
  3. Establish the price you want to charge. You can start with an ideal figure based on how much you hope to gain from the sublease arrangement, but also have in mind a price that you won’t accept any less than. You want to make sure it is ultimately worth your while to bring on a subtenant.
  4. Create an agreement that covers the details like utility payments and rent due dates, then have that agreement checked by a legal professional. You are essentially establishing your own lease agreement between you and your tenant, so be sure it includes all of the terms and provisions that are important to you. Allowing a lawyer or real estate professional to examine it will help ensure you don’t overlook anything important.

Each of these steps is crucial, as they protect you from winding up in an uncomfortable or costly situation. After you’ve taken the time to conscientiously walk through the process, you’ll be ready to sign the agreement and kiss your unused space goodbye.

Boost Income and Eliminate Excess With a Sublease

Subleasing can be an ideal situation for maximizing profits or simply cutting down on wasted space. There’s no reason to let all of that extra room just sit and collect dust—set yourself on the path of subleasing your office space. Just make sure you take a little time to consider the logistics first.

Luckily, you have friends at PivotDesk who are willing and able to help at each step of the way. Feel free to reach out and we’ll help guide you in subleasing your office space.

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