When your company's office utilization drops, you'll probably find that you have unused space. Whether you have a portion of an existing office sitting vacant or you vacate entire locations, the carrying cost for the space is a drain on your bottom line. Finding a subtenant stops the red ink. However, finding the right one isn't always easy.
Before starting the process of sourcing a subtenant, give careful thought to retaining a commercial real estate broker. Your broker can help you understand your rights under your lease, negotiate on your behalf with your landlord and find a subtenant for you, if you need to do that route. While some complicated situations may also call for the expertise of a commercial real estate attorney, the negotiating and marketing savvy of a commercial real estate broker will be invaluable.
Step One: Read Your Lease
Your lease describes your rights. It will let you know what type of tenant you need to find, how you need to work with your landlord, and whether you can sublease or assign your lease. Also, if your lease bars you from subleasing, you'll want to know that before you waste time. You may be able to negotiate for more flexibility, but at a minimum, your landlord will have to let you do what your lease allows.
Step Two: Talk to Your Landlord About Your Office Utilization Problem
Regardless of what your lease says, you can also get more from your landlord. For instance, if you have four years left on your lease and you occupy one-quarter of the floor, and your co-tenant will leave in a year if they can't expand, your landlord may let you out of your lease. He also may be willing to let you assign your lease to a tenant with a better financial position than yours, even if your lease doesn't expressly contain that right. He might also know of a tenant that is looking for space.
Try REoptimizer®'s Free Office Optimization Calculator
Step Three: Divide the Space
Unless you're renting out an entire space or you just have a few cubes to rent to freelancers looking for a place to work, you'll probably want to divide your space so that the new tenant can visualize what they'll be occupying. While it's possible to build an office utilization scheme from a floorplan, it's a lot easier for tenants to do when they can physically see the limits of the space. Getting the wall built will prepare a space to be leased. In the process, you may need to work with an architect or space planner to ensure that the split spaces will still meet any local requirements for ingress and egress.
Step Four: Finding the Tenant
Perfect tenants come in two flavors. The first is a much stronger company that will make your landlord so happy that he releases you from liability for your space. The second is a company that needs space quickly and doesn't have a lot of money to spend on it. The latter type of tenant is more likely to adapt its needs to your space as you have it designed, reducing what you need to spend on TIs. Most of these companies are rapidly growing an in a position where their office utilization is so high that hey need to move quickly. Since they're growing, they may also be comfortable with the short-term nature of a sublease. After all, they might outgrow it, too. Fast occupancy is beneficial since vacancy is expensive with short-term leases. For example, with 24 months remaining, one month is 4 percent of your total potential income.
Need more subleasing advice?
Everything You Need to Know About Subleasing Your Space
