First in a three-month series highlighting the state of the Tenant’s market
 
Subleases have always been a flexible way to secure affordable business real estate, even in healthier markets than the one we are experiencing. Still, subleases do present some drawbacks, such as being subject to the terms of the original lease, having to wade through multiple levels of approval for service requests, the risk of eviction should the original tenant default and being limited by the existing physical layout of the space.

However, today’s sublease market is providing opportunities that easily outweigh the drawbacks. Primarily, rates for well-appointed space in great locations are, in many cases, hard to believe. Many sublease options also include an array of value-adds, like furniture, high-end conferencing technology and phone systems. 

Many landlords are in difficult financial positions as a result of the lending industry’s inability to re-finance billions in commercial real estate mortgages. Thus, to put it mildly, property owners are very open to negotiation, as are the tenants offering the sublease.

Unfortunately, this recession will be known for how dramatically it has swept through our country’s industrial foundation. One day, a company is whole and stable; the next, shutting its doors. Thus, if you can prove long-term stability, you can become a very attractive option for both a company needing to stop the bleeding and a landlord needing income. 

Recently, we helped a client with a sublease that secured them an impressive space at a very attractive rate. Upon scouring the market on their behalf, we found that many first generation options simply couldn’t compete with the flexibility, price and terms of a sublease. Additionally, upon expiration of the sublease, our client will be in an ideal position to negotiate an almost as equally favorable direct lease. In essence, the sublease works in their favor as a “trial run.” And, in today’s market, a proven tenant becomes a valuable asset to a landlord.

We would be glad to answer some questions for you about what’s happening in today’s market from a tenant’s perspective. We understand that there is a lot to be confused or just curious about, given the rollercoaster-like fluctuations in the market.  Next month, we’ll touch on the concept of “blend and extend” and how it could help you safely “lock in” your space for the next few years.

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