If your business has changed significantly and your current space no longer fits your needs or budget, you may want to explore subleasing your office. At a basic level, subleasing your space means leasing part or all of your space to a subtenant while maintaining your lease obligation to the landlord. Before you decide that subleasing is right for you, it’s important to know what you’re getting into.
What Are My Responsibilities When Subleasing My Office?
When you sublease, you assume responsibilities of a landlord, but that doesn’t mean that your status as a tenant disappears. You are still bound to the terms and conditions of your original lease, which includes monthly rent and may include maintenance. You are also responsible for preparing your space for your new subtenant. You'll become what's known as a sublandlord.
How Much will Subleasing My Current Office Cost Me?
While subleasing your space should cover most of your rental costs, you’ll want to assess the costs associated with subleasing and determine if it’s worth it for your company.
- Brokerage commission: Your new subtenant will be using a broker, and as that subtenants’ sublandlord, you’ll have to pay their broker commission.
- Attorney fees: You’ll need to pull in an expert to help you draft and finalize the sublease agreement. You’re on the hook for any attorney fees.
- Market concessions: In order to sublease your space, you may have to provide incentives to potential subtenants. These could include free furniture or a free month of rent, or potentially a lower rental rate to adjust for post-shelter-in-place pricing.
- Sublease recovery: This represents the percentage of the rent you’ll recover, which should factor in broker commissions, attorney fees and market concessions
- Lease-up time: You’ll still be responsible for your space’s rent even as you’re waiting for a new subtenant, so it’s helpful to estimate how long this will take based on your knowledge of the market and your space’s desirability.
- Moving and relocation costs: You are responsible for all costs associated with getting your company out of the space and potentially into a new space
- Space maintenance: Review your lease. As a tenant, you may be responsible for restoring the premises to its original condition, or responsible for repairing the HVAC if it breaks.
What Does the Office Subleasing Process Look Like?
Below is a step-by-step example of how to sublease your office.
- Contact your broker: We can help you decide if your space is a viable sublease option and will help you navigate the process.
- Review your lease with your broker: You’ll want to find your “Sublease and Assignment” clause. This will tell you the specifics about your rights pertaining to subleases.
- Talk to your landlord: Your landlord has to give final consent for you to be able to sublease your office. If you’re looking for a new space, they may also be able to accommodate your needs in the same building, getting you off the hook for subleasing. If you are looking for space larger than your original one, your landlord may be open to releasing you from your existing obligation to relocate you to a new, bigger space, a win-win for both parties.
- Prepare your office for the market and list it: Listing your space on Truss will help you reach like-minded tenants. We even offer complimentary 3D virtual tours shoots and professional photos of your space to share with your Truss listing and your network. Some of our tenants have found potential subtenants by posting an announcement about their subleases on LinkedIn.
- Find a subtenant and draft terms and conditions: Remember that you’ll be preparing a new lease for your subtenant. Your attorney and broker can help you draft the lease and negotiate.
- Review subtenant terms and business: It’s important to verify that your subtenants can meet your sublease terms and get approval from your landlord. Keep in mind that you’re still on the hook for your lease. You’ll want to review their financials and ensure they have a similar line of credit, get their insurance, ensure that their use of the space matches building standards.
- Present your proposed subtenants’ financials and the negotiated sublease agreement to your landlord: Your landlord has the right to refuse your proposal, which typically happens if they are already prospective clients or lease another space in the building.
- All parties execute the sublease
- Subtenant coordinates with the building to move in
Thinking about Subleasing Your Office?
Truss brokers can help you decide if subleasing is right for you, list your space with a complimentary virtual tour and photos, connect you to potential tenants and an attorney, draft your sublease and even find a new office once you’ve subleased your current space.
- Chicago: Nicole Weldon, Austin Zimmerman
- Los Angeles: Sam Devorris, Chris Gunderson
- Washington, DC: Cam Kostyack
What Other Office-Leasing Related Questions Do You Want Us to Address?
What other questions do you have about office leasing? Send them our way (email@example.com) and we’ll do our best to get information out there.