The Pros and Cons of Subleasing Commercial Spaces
Weighing the Advantages and Disadvantages of Subleases
There are many advantages to subleasing commercial spaces. But to get the most out of subleasing, be sure you shop around first, never accept a first offer (always try to negotiate a better deal), and make sure you carefully review both the sublease and the sublessor's original lease. A tenant (the sublessor) who will not show you the original lease should not be trusted.
Pros of Subleasing Commercial Spaces
Subleasing your commercial space can be very advantageous for a smaller business or one that is just starting out. Some of the potential perks include:
Cheaper and Easier to Obtain
Subleased spaces are often more affordable than a standard commercial lease, and it may be easier to qualify for a sublease than for an exclusive lease.
You Can Start Small
You can rent just the space you need. If your business is small and you only need several hundred square feet, you will find a lot more options in subleasing markets.
Fewer "Strings Attached"
Subleases are generally simpler and more straightforward than other complicated types of commercial leases. However, subleases are still binding legal documents and are also contingent on the original lease. You should give strong consideration to having an attorney or trusted realtor view the sublessor's lease, as well as the sublease before signing.
Most subleased spaces are already finished; so you will not have to worry about upgrades and build-outs.
Access to Common Areas
Many subleased spaces provide access to reception areas, break rooms, conference rooms, storage, and other shared spaces at a reduced cost or, in some cases, even for free.
Since subleased spaces are part of a bigger space, you may not have to pay for alarm systems or internet access if the space is already wired for these things.
Option to Take Entire Space
If the sublessor wants to move before their lease is up, they may be able to sublease the entire space to you. It can make obtaining larger spaces easier to qualify for if you have an existing financial relationship with a sublessor, and should you wish to keep the space after the original lease has expired, you may be in a better position to negotiate your lease with the actual landlord.
No CAM or Other Unpredictable Fees
In a typical sublease, you are responsible for repairing damages you cause, but your sublessor (or their landlord) is usually required to repair and maintain common areas. In most cases, subleases are fully serviced leases with a flat monthly rent, meaning there are no common area maintenance (CAM) charges and unpredictable fees. It can make budgeting for rent payments easier.
Networking and Social Opportunities
If you work alone, you may benefit from subleasing space if you team with someone in a similar profession. You may get business or client referrals, have a new peer to talk industry with, or share resources.
Access to Administrative Support
If space is shared, and you are not in the office all day, other sublessees or employees of the sublessor may be able to answer your phones, receive mail and packages, or greet unexpected visitors. If you ask for these services, you may need to pay for them, but you won't have to be tied to the office all day just to get the mail.
Access to Services
Many sublessees can negotiate leases that allow them access to the sublessor's FAX and photocopying machines or other office technology, requiring fewer pieces of equipment to purchase.
Cons of Subleasing Commercial Spaces
The disadvantages of subleasing are mostly logistical (how you can use the property may be limited) and legal (if you have problems with either the sublessor or the sublessor's landlord). To minimize your legal exposure and protect rights as a sublessee, be sure to have an attorney review your sublease and the original lease before signing.
Unfavorable Lease Terms Can Be Passed Along to You
If the sublessor negotiated a "bad" deal with their landlord, they might try to pass certain fees and higher rent along to you. Be sure to read both the sublease and original lease and compare your sublease terms to other comparable rents and offers in similar spaces. This is one reason why you should look at as many other spaces as possible before deciding on any particular space.
Default by Sublessor
If your sublessor defaults, it could affect your sublease. You can address this by including in your sublease rights to recover costs and damages if you are evicted because of the sublessor defaulting (for example, you pay the sublessor rent, but the sublessor does not pay their landlord).
Not Your Private Space
It could affect exterior and interior signs, advertising, or present a "smaller business" feel to clients who come to your office. For this reason, it is helpful to sublease from someone in the same profession. For example, an attorney should first seek to sublease from another attorney if they are sharing space. By teaming with other similar professions, it can help dispel the small business atmosphere.
Delays in Maintenance Services
If you need repairs to the property or other services provided by the landlord, you may still have to go through the sublessor for remedy. It can cause delays and headaches in problems being addressed and can complicate legal remedies for unresolved problems.
Limited "Nesting" Options
You are at the mercy of the decorating tastes of your sublessor.
Despite the disadvantages, subleasing generally offers new and small business owners an affordable and convenient way to get out of the home-based office and into the "real" world. It is important to review the pros and cons of each opportunity and have a professional (attorney or licensed real estate agent) review the documents before signing.