Wharton Property Advisors, Inc.
Extra Office Space: Subleasing is a Winning Strategy

Extra office space is a non-financial asset within your overall portfolio that has unique potential. If you have under utilized space of over 1,000 rsf hiring an experienced real estate agent will help you maximize its return.

A shrewd step when developing a business plan can be to take extra office space when the original lease is signed. Long term cost efficiencies can be realized by locking in space for your business to grow. As a result, during an interim period before that space is needed, costs can be transferred to a third party by subleasing it. When the business expands later, you can take back the subleased area, thereby, avoiding the expense and inconvenience of relocating your firm due to a space shortage.

The best way to realize the potential gains from subleasing is to hire an expert to advise and execute a sublease strategy for your business. An experienced real estate agent will know how to quickly market the space and will handle the entire transaction so that you can focus on your business. Through years of experience managing such deals, she will know how to locate the companies and/or professionals who need this kind of space and who are compatible with your business. By selecting an agent with integrity and a sound reputation, your space will be accurately presented to a wide network of agents.

To start, the agent will advise what listing price will both cover costs and create attention. Once potential sub-lessees are found, your agent will oversee the bidding process. She will know how to circumnavigate the documentation maze in a sublease consent process. Throughout the process, she will represent your interests and will advise from financial and other business perspectives. As a result of her expertise in the market, she will help you negotiate the best possible price and find a creditworthy subtenant.

The choice of an agent is pivotal to the success of the subleasing strategy. You should make sure that there are no conflicts of interest, i.e., that the agent does not represent competing spaces or parties, either inside or outside the building. Big firms are often prone to these conflicts so you should question prospective agents closely about this issue. You should also select an agent with extensive experience with sublease transactions. Ideally, your agent should be a business partner, someone who will work hard for you, with creativity and diligence.

Subleasing extra space can be an important component of your long term business plan. Hiring a trusted real estate agent is a winning strategy!

7 Steps to a Successful Sublease

1. Contact the landlord of your building to discuss your tenant’s situation. Discuss whether the landlord is interested in recapturing the space and the economics of space recapture. If so, at what price? However, note that most leases provide the landlord an automatic right of recapture if a subtenant is presented, so your agent may wish to explain that issue in advance to save time and expense later.
2. Have your agent coordinate the marketing of your office space as a sublease in conjunction with the landlord’s agent marketing it as a direct lease.
3. List your space on the CoStar space listing service used by the NYC brokerage community. (Your agent can do this for you at not cost.)
4. Contact all tenants in the building to let them know your space is available. Focus on tenants in the building who may have leases coming due. Your agent will have that information.
5. Prepare a flier of your space with the floor plan on the back. Your agent can send out monthly, individual fliers to the NYC brokerage community.
6. Find a suitable (sub) tenant. If the landlord will not accept that subtenant, your agent can negotiate and coordinate the recapture of your space by the landlord.
7. Consummate a successful sublease with the assistance of an agent and a capable attorney. Alternatively, negotiate a lease termination with the landlord, preferably at no cost to the tenant.