Subleasing Your Commercial Space

5 Things to Consider When Subleasing your Commercial Space

By Phil Kubat, Commercial Division Manager

When acting as a Tenant Advocate it is important to discuss exit strategy with our clients. One of the best-known strategies for getting out of your lease liability is to sublease your space to another tenant. In this scenario, you will become the sublandlord and the new tenant will become responsible to pay your lease. Here are some key things to keep in mind:

1. Consult an Attorney and Know your Rights. You need to determine if you have permission and what the terms of the lease allow you to do. Some landlords require prior approval of your subtenant. Look into the fine print of your lease and be sure to get legal counsel. Some landlords will even charge attorney fees or management fees for the sublease. An attorney can also help you draft the sublease agreement and make sure it works well with your current Master Lease.

2. Engage Your Landlord Right Away. It is so important to work with your landlord, property manager and their listing agent, NOT against them. They will have to approve any new tenants and they may be privy to other tenants expanding in the building and can help market the space. You will also be working with their architects and other key staff.

3. Figure Out a Fair Market Lease Rate. Work with a local agent who can pull reports to show you how much direct space and sublease space rental rates are on a price per square foot basis. The benefit of a sublease is that you can attract tenants with below market rents. Remember that some landlords will not allow you to sublease your space for more than your current lease rate. I recommend you do not work with your current building owner's agent as some would say there is a conflict of interest there.

4. Be Flexible. The benefit of a sublease is the ability to offer flexible terms at below market rents. Be willing to work with the subtenant on things like furniture, length of the lease term and the rest schedule. Throwing in some of these concessions could ensure a quick solution to your sublease need. This is a great time to think outside of the box and be creative.

5. Stay in Touch with Your New Subtenant. Just because the lease is signed that does not mean that the deal is over. If the subtenant stops paying rent you still may be liable to make the lease payments. Check up with them to make sure they are happy and that business is good. At this point you are partners and have a vested interest in them, their happiness and success.

With the right broker to help guide you through this process you will better your chances of subleasing your space. Whether it is subleasing the entire space or a portion of it, following the advice above will help you stand out in the market.

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