Subleasing: An advantageous alternative
by Benjamin StoutWith the recent economic downturns affecting most sectors, businesses of all types are trying to maximize revenue while minimizing expenses.
One large expense for any business is real estate costs, and an appealing opportunity is subleasing. Subleasing space is a very effective option for two types of businesses: those that don’t need all the space they occupy and those that are bursting at the seams.
For a tenant that is downsizing, closing a location or eliminating redundancy and has more than one year left on their lease, the financial obligation of the lease can be relieved by seeking a subtenant.
A tenant that is expanding may consider executing a sublease with a similar expiration date to alleviate excess space needs until both leases expire, at which time the tenant would be looking for a larger, single unit. Alternatively, an expanding business could move to a larger space immediately, in which case finding a subtenant is the only way to mitigate the financial responsibility on the existing lease.
If your current space is not fitting the needs of your business but your lease doesn’t expire for one year or more, you should consider subleasing a portion or all of your business’ space. Most commercial leases have a clause that allows the tenant to sublet space subject to landlord approval. In light of the current economic conditions, most landlords are amenable to such arrangements, as continued income stream is critical and not a guarantee in today’s market. And as a tenant, if your business situation has changed and you no longer need the space, the sooner you can eliminate that unneeded expense, the better.
Another good way for a tenant to save money in this economy is to consider an executive office suite – an increasingly common option for small or startup businesses. One of our clients, Glenn Anderson of Viamark Advertising, has leased many executive office suites all over the country and is currently subletting space. Anderson recommends executive office suites, and cites the following three reasons:
- Executive office suites are ideal if you only need a limited amount of office space for a few people.
- Typically they have shared conference room, kitchen and reception area that you can use as needed. This means you’re not paying for square footage that you only use occasionally – and you don’t have to pay to furnish this space, either. If you only need one or two offices, it can be a lot less expensive than renting and furnishing your own space.
- Fixed costs such as utilities like heat, air and electric are typically included in the monthly rent, so you know exactly how much your costs are per month.
While the current economy has created numerous challenges for businesspeople, there are cost-effective alternatives when it comes to housing your company and employees – be sure to research all of your options before making a commitment.
In addition, it is important to consult with your advisory team, including your accountant, attorney, tax professional and insurance agent, to ensure that your sublease agreement covers the necessary contingencies. ■
Published in Plymouth County Business April/May 2009
Benjamin Stout Benjamin Stout is Director of Sales and Leasing for Atlantic Properties, a commercial real estate brokerage and construction firm located in Plymouth. He can be reached at bstout@atlanticproperties.com. 
