Subleasing commercial space is a common situation for many tenants. Business needs can change quickly, while commercial leases often last five years or longer. Whether you’re downsizing, growing, or no longer need the space, these six tips will help you make the most of a sublease.
1. Stay Focused on the Main Goal
Your priority should be to recover as much rent as possible during the remaining lease term. It can be tempting to focus on how your sublease rate compares to current market rates, but that only matters if you are considering multiple offers.
Instead, assess the offers you actually have. For instance, if you have 30 months left on your lease, waiting three months for a slightly better offer could mean more financial loss than gain. Every month without a subtenant reduces your total recovery.
2. Compare Current Market Conditions to When You Signed
Understanding today’s market helps you set realistic expectations. Unless rental rates have gone up significantly since you signed your lease, you may need to sublease the space at a discount.
Being aware of this potential gap allows you to plan accordingly. The more informed you are about current rates, the better decisions you can make.
3. Review the Subtenant’s Financial Health
Subleasing does not remove your responsibility under the master lease. If your subtenant stops paying, you are still liable for the rent.
To protect yourself, review the subtenant’s financials before signing an agreement. A financially stable subtenant reduces your risk and gives your landlord more confidence in the deal.
4. Consider How Much Time Is Left on Your Lease
A short remaining lease term can make subleasing more difficult. While flexibility can attract some companies, most do not want to commit to a term shorter than 12 months due to the uncertainty.
If you are nearing the end of your lease, talk with your landlord about the option for the subtenant to stay beyond your term. This can make the opportunity more appealing to the subtenant and simplify the process for everyone involved.
5. Decide What to Do with Office Furniture
Many subleases include office furniture, but it rarely has much resale value. If the incoming tenant wants to keep the furniture, consider offering it at little or no cost.
Unless you plan to reuse it elsewhere, furniture can be a good bargaining chip to close the deal quickly.
6. Plan for Landlord Consent and Timing
Most commercial leases require landlord approval for any sublease. Even if both you and the subtenant are ready to move forward, the landlord typically has up to 30 days to review and approve the arrangement.
Make sure to factor in this review period when setting your target sublease start date. This helps avoid delays and keeps your cash flow plan on track.
About National Lease Advisors
National Lease Advisors is one of the top lease administration firms in the country. We have carved out a niche by focusing on clients with ten to 1,000 locations, allowing us to provide a level of service that cannot be matched by full-service global firms. Our model is designed to serve clients with a personalized approach, ensuring their unique needs are met with the highest level of expertise and care.
We work on your behalf to ensure your lease terms align with your financial goals and operational needs.
Contact us to learn how we can support your lease strategy from initial negotiations through long-term management.