How to Effectively Sublease your Office Space
Bisnow had an interesting article on the office market titled Average Office Rents Continue Ticking Up Despite Rising Vacancy, Piles Of Sublease Space.
I can echo a lot of the sentiment in the article, especially when it comes to space on the sublease market. Below I’ll give you a play-by-play strategy for how to sublease your office space.
The Scenario:
The office suite is 10,000 square feet here in Atlanta, GA. You’re paying $25 RSF Full-Service. You are 21 months into a 60 month lease. 3% Annual escalations.
In this scenario, you have 39 months remaining or $841,000 in remaining consideration left. Your monthly rent payment is approximately $21,000 per month. Each month represents 2.5% of the remaining value.
Our goal when we sublease office space for clients is to recover as much of the total value of their master lease as possible! Time is of the essence here. Even if a company comes Day 1, it is still going to take a month before you can get them signed and occupying the space.
The Strategy:
- Make the suite as turnkey, spec, ready-made as possible. Spend $1,000 and get everything that a new tenant won’t want cleaned out. We need them to see the space and theirs and theirs TODAY.
2. Widely market it. Traditional office leases best on Costar with a tenant rep broker. But sublease space is often smaller companies. Blast it on LoopNet, Crexi, Commercial Cafe, The Broker List — hell list on the MLS if it is a smaller space (under 5,000 RSF) . Anywhere and everywhere. Make sure everyone in the market can find it. I’m probably generalizing but a lot of sublease space, especially for shorter term duration leases is taken by unsophicated tenants. Be where they are looking!
3. Pay a market commission. Subleases are tough. Everyone knows it. Don’t give the tenant rep broker a reason to not consider your space.
4. Have a firm grip on the market and act accordingly. If your lease is at $25 RSF and the building is at $25 RSF, I’m sorry but you have the give an incentive to get the deal done. The building is going to offer free rent and TI. You are trying to avoid that so build it into your pricing.
5. Rip off the bandaid. Just move the space. Act quickly and get it done. Remember, every month is sits vacant is a portion of your obligation you can’t get back. Once you fall below certain lease durations, it is a tough sale.
