To begin with, one of the first things you will have to decide when starting your search is whether or not to consider sublease spaces. This article will explore some of the benefits and drawbacks of sublease spaces so you can decide if they are a good fit for your company.
Why a company would want to consider a sublet:
- Sublets work best for companies that need flexibility and cannot commit to a longer term lease.
- Sublets tend to be priced below market rates (typically a shorter term sublease is priced more aggressively than a longer term sublease).
- Sublets can get your company into better quality building then you could otherwise afford with a below market rate. If you are interested in a longer term lease your broker can negotiate an extension and you can end up with an overall blended rate that is favorable over the long term.
- Sublets often come with significant capital improvements, which may include furniture, wiring and phones saving your company the time and money associated with setting up a space.
Why a company would want to avoid a sublet:
- There are significantly fewer sublease spaces available at any one time as compared to direct lease spaces requiring greater flexibility in your location, layout, size, timing and budget
- Sublets require the landlord’s consent which can delay possession.
- Some leases have recapture provisions that allow the landlord to take back the space in lieu of consenting to the sublease which can have unexpected results.
- As a Sub-tenant you inherit the master lease which may have unfavorable terms which is typically non-negotiable.
- Sublease spaces are usually leased in “As Is” condition and any required work is usually the responsibility of the sub-tenant. This can be mitigated to some extent by negotiating for a rent concession to help offset the time and money needed to make the space work.
- There is the potential liability of the sub-landlord’s default which results in nullifying the sublease and possible loss of your security
Given the current situation, where NYC office rents are reaching historical highs, subleases are certainly worth considering and can save your company a lot of time and money. If you are careful and have some flexibility in the size, location, timing, length of lease and layout, subleases can be a very good choice for your business.. As your Real Estate Broker we will analyze your requirements and help you decide if a sublease is the right office space solution for your company.