Five Things to Consider When Subleasing your Commercial Space
When acting as a tenant representative it is important to discuss exit strategy with a client. One of the best known strategies for exiting a current lease liability is to sublease the space to another tenant. In this scenario, you will become the sub-landlord and the new tenant will become responsible for paying your lease. When subleasing commercial space the following are a few considerations to keep in mind.
- Consult an Attorney. You need to determine if the terms of your lease give you the needed permission to sublease your commercial space. Some landlords require prior approval of your subtenant. Review the fine print of your lease and be sure to retain legal counsel to make sure every is copacetic. Some landlords may charge attorney or management fees to sublease commercial space. An attorney will also help draft the sublease agreement.
- Engage Your Landlord. It is so important to work with your landlord, property manager, and their listing agent when subleasing your space and giving ample time for the process to play out. 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 effectively.
- Figure Out a Fair Market Lease Rate. Work with your commercial agent to 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 rental rates. Keep in mind that some landlords will not allow you to sublease your space for more than your current lease rate.
- Be Flexible. The benefit of a sublease is the ability to offer flexible terms at below market rental rates. Be willing to work with the subtenant on things like furniture, length of the lease term, and the rent schedule. Throwing in some term concessions could ensure a quick solution to your sublease needs. This is a great time to think outside of the box and be creative and your commercial agent can aid with this!
- 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 your lease payments. Check up with them to make sure they are happy and that business is doing well. At this point you are partners in your commercial space and you have a vested interest in their success.
With the right commercial broker to help guide you through the sublease process you will better your chances of subleasing your space to the right tenant!
Phil Kubat is the Principal & Managing Broker of Transworld Commercial Real Estate, a commercial real estate brokerage firm in Colorado. Phil, a veteran in the Colorado commercial market, brings 15+ years of experience to his work with Transworld Commercial Real Estate (TCRE). TCRE serves as a strategic partner to clients for their commercial acquisition and disposition needs. Phil specializes in Leasing & Listing Sales Representation; Tenant & Buyer Representation; Corporate, Franchise & Franchisee Location Services; Co-Brokering with Franchise & National Firms; and Office, Industrial/Flex & Retail Site Selection.