The Benefits and Drawbacks of Subleasing

by Jan 9, 2020Tenant Representation, Tenant Tips

The Benefits and Drawbacks of Subleasing

The unique circumstances of the parties and space on offer combined with a landlord’s position within a market can make for an amazing deal when subleasing.

But subleasing can also be a risky move. Let’s look at the benefits and drawbacks.

The Benefits

Price

In a soft market sublease space almost always trades below market rates.

Flexibility

Subleases are often available for shorter-than-typical terms and may allow for finishes that would otherwise be out of price range.

Furnishings and equipment

Sometimes, the sublandlord will leave furniture or communications equipment. This could add up to significant upfront savings for a company whose requirements are suited to what is left behind.

Location

Access to a building can sometimes be found with a sublease situation that might not otherwise have an ideal space or be within cost parameters.

Leverage

Negotiating leverage with a sublandlord exists by default. The company offering the sublease is doing so for a reason. And that’s not usually because they are in a positive situation. Often, any relief is welcomed and this puts the subtenant in the driver’s seat.

 

The Drawbacks

T.I. Money and Modifications

The sublandlord is likely hurting for money already. They are not likely to provide a generous allowance, if any. Time is probably of the essence so they won’t want to wait around while the subtenant completes a build-out. The master landlord has no obligation to the new tenant, either, so likely won’t front any cash now in anticipation of a return years in the future.

Terms

You probably need to live with the terms that the sub-landlord negotiated with the master landlord. Options to renew or expand are not usually transferable. If the term is short, the master landlord has little incentive to extend a sub tenant’s lease now at today’s rates. This is especially true if they anticipate that the market may be better (for them) at lease expiration.

Amateur Landlord

With rare exception, a sublandlord will probably experience a learning curve. This can mean additional time to resolve potential issues and come to an agreement with otherwise simple negotiations.

Trust

In a sublease situation, there is always a risk that the sublandlord could default or declare bankruptcy. A subtenant may also be subject to significant pass-through charges starting the day possession is taken. It is pertinent that the small print is clearly defined and appropriate addendums included to protect the new tenant.

Companies tend to “upgrade” when subleasing. They’ll often take a class of space or finishes that would rent for rates above what they would otherwise be willing or able to pay. Unfortunately, when the sublease expires, they’ll have to either pay the higher market rates or incur the cost of moving. Doing due diligence prior to accepting a sublease agreement could add up to saving a lot of time, money, and frustration in the long run.

Looking to move or expand your space? Contact Ryan Hartsell with questions or assistance to purchase or lease commercial real estate in and around the Houston, Texas area.

Ready to Secure
Your Space to Thrive?
Let's Talk!

2000 W Loop S, Suite 400
Houston, Texas 77027

Our Services

Renew
Renew
Relocate / Relocate Early
Relocate / Relocate Early
Expand
Expand
Downsize
Downsize
Sublease / Terminate
Sublease / Terminate
Purchase
Purchase
Sell
Sell
Healthcare Tenant & Buyer Agents
Healthcare Tenant & Buyer Agents
Portfolio Management
Portfolio Management
Data Analytics
Data Analytics
Economic Incentives
Economic Incentives

What our Clients Say

  • Ryan Hartsell with Oxford Partners was very helpful in finding my company a new office space recently. Ryan made the process very easy and smooth and was able to work... read more

    Houston LISC Avatar Houston LISC
    August 23, 2022

    I recently had the privilege of working with D.J. Hale on a couple of projects. I have to congratulate you folks on having such a wonderful person in your employ.... read more

    Kenneth Kleinmann Avatar Kenneth Kleinmann
    February 23, 2023

    Absolutely relentless. Garth Plyler is our hero. We started looking for new corporate offices and he didn’t quit until we were in the new place. He worked until he found... read more

    Don Doyle Avatar Don Doyle
    August 2, 2023
  • Chase McAteer at Oxford Partners: I met Chase McAteer when I was looking for a leasing space for my therapy center in 2020 in Houston Texas, just at the start... read more

    Premala Naidoo Avatar Premala Naidoo
    August 23, 2022

    Ryan and Oxford Partners have been a tremendous asset to our business. Their dedication to serving our needs is unparalleled.

    Victor Lee Avatar Victor Lee
    August 23, 2022

    Oxford Partners handled the 2022 negotiation of Strategic Construction's corporate lease renewal flawlessly. Ryan Hartsell knew the market and had a great working relationship with the landlord reps, that he... read more

    Matt Beshara Avatar Matt Beshara
    August 23, 2022
  • My husband and I are very pleased with Ryley! He did an excellent job in finding us a property in the time that we needed it. He provided us with... read more

    TEXAS QUALITY PLUMBING Avatar TEXAS QUALITY PLUMBING
    August 23, 2022

    Had a wonderful experience with both Jacob and Vincent. They met my needs, battled for the best rates and outcomes during the lease negotiations, and were very quick to... read more

    Ryan Reisner Avatar Ryan Reisner
    July 23, 2023

    Perry and Matt were excellent to work with. They were patient and listened to our wants and needs when it came to finding a new office/warehouse for our quickly... read more

    You Know Avatar You Know
    November 23, 2022
  • Vincent Vega has been so helpful throughout the process of obtaining a new office space. He was always available to answer all questions when needed. I definitely will recommend him.

    Faustine Avatar Faustine
    August 23, 2022

    Vincent assisted my law firm in securing new office space and was always responsive, insightful and a great advocate for my business throughout the entire process. I cannot... read more

    Brian Nguyen Avatar Brian Nguyen
    August 23, 2022

    We have used Ryan and his team for years, for our commercial leasing needs. He's prompt, professional, and tenacious in ensuring your looking out for your best interests, throughout... read more

    Dave L Avatar Dave L
    August 2, 2023
  • Oxford Partners is the way to go if you’re looking for the right space and great contract negotiations. Their communication, professionalism, and Friendliness is unbeatable. They make you feel like... read more

    James Stevens Avatar James Stevens
    August 16, 2023

    Ryan Hartsell is great to work with!

    Patricia Smith Avatar Patricia Smith
    November 23, 2022

    Great experience working with Ryan! Would recommend.

    Amit Mittal Avatar Amit Mittal
    August 23, 2022
  • Working with Oxford Partners to find our companies new office space went really well. We had the pleasure of working with DJ who was professional, helpful, and responsive throughout the... read more

    Drew Roberts Avatar Drew Roberts
    July 23, 2023

    Chase helped us find a suitable commercial/retail location in Mesa Arizona. It has taken several months. I have had a similar relationship with other real estate professionals in the past,... read more

    Randy Holmgren Avatar Randy Holmgren
    November 23, 2022

    Ryan Hartsell and his team did a great job of helping us look at new space options and then renegotiate with our current space in a beneficial way. We... read more

    Mark B Avatar Mark B
    February 23, 2023
  • Matt did a fantastic job getting us into a great building. I was indecisive and wasn't sure what I needed or where I wanted to be. Matt was very patient... read more

    Brian Ayson Avatar Brian Ayson
    August 18, 2023

    Highly recommended! We were in an urgent need of assistance in relocating our facility, and Chase was just beyond helpful throughout the whole process. Very professional, knowledgeable, and always beyond... read more

    Sean Choi Avatar Sean Choi
    August 23, 2022

    Working with Chase is the absolute best! He's knowledgable and has your best interest at heart when finding a commercial space for your business.

    Emma Wilking Ghelber Avatar Emma Wilking Ghelber
    August 16, 2023
  • I can't say enough good things about Chase and his firm. From day 1, Chase has been attentive, professional, and an advocate for us (as a tenant looking for... read more

    Ted Holmgren Avatar Ted Holmgren
    November 23, 2022

    I had a great experience with Oxford Partners. Matt Rogers helped me and my Law firm secure a great new lease on a fantastic building/office. There is no... read more

    Sean Darvishi Avatar Sean Darvishi
    August 16, 2023

    Professional, supportive and quick. I got a great help from DJ and really appreciate it.

    Jimin Lee Avatar Jimin Lee
    April 23, 2023
  • You don't want Chase McAteer, you NEED Chase McAteer! I had the pleasure of working with Chase a little over 5 years ago when I started a new company and... read more

    Diana Dang Avatar Diana Dang
    August 16, 2023

    Oxford Partners were great with their follow ups and helped us negotiate a better contract. Thank you Ryan and Perry for all your help.

    AliAsgher Sunelwala Avatar AliAsgher Sunelwala
    August 22, 2023

    Chase was outstanding when I needed help finding commercial real estate for my medical practice. I had specific requirements and he worked relentlessly to find me options in a seller's... read more

    Dr Iyad Daher Avatar Dr Iyad Daher
    September 23, 2022
  • Oxford Partners was a pleasure to work with. Very professional and courteous, D.J. acted in our company's best interests to find the best commercial office space, layout and price... read more

    Darren T Avatar Darren T
    August 16, 2023

    Oxford Partners, and specifically D.J. Hale, provided us with the best representation we could possibly ask for when searching for a property to purchase for our church. They will be... read more

    Matthew Hefti Avatar Matthew Hefti
    August 16, 2023

    Oxford Partners listened and supported our needs throughout the negotiation process. Thank you OP.

    Sergio Van Dusen Avatar Sergio Van Dusen
    April 23, 2023