Pushing Dirt

As the market continues to struggle we will continue to see the amount of sublease space available to grow. Tenants with unneeded space are especially motivated to move sublease space. Their goal is not to create value in a building or positive cash flow but simply to “stop the bleeding” of rent that must otherwise be paid for unwanted space. As such they slash asking rents and make vicious competitors to owners with space to move.

Landlords competing with sublease space can highlight some of their advantages including an ability to offer renewal terms, to fund tenant improvements, and to offer expansion or relocation within a larger portfolio.

Tenants should take a hard look at sublease opportunities on the market
as they can offer a phenomenal opportunity for savings. Tenant brokers may not push these options as subleases can be more difficult to transact, and may offer smaller commissions (owing to shorter lease terms). It may also be more challenging to collect commissions from sublandlords. As such you may need to push your broker to seek out sublease opportunities on your behalf and make sure your broker collects the fee he or she has earned.

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When business is down and you need to downsize, you might consider a sublease. Also consider approaching your landlord about a lease buyout or rent reduction of some other sort. The leasing market is miserable and your space may not lease at any price. Your landlord, on the other hand, would rather have some income than no income at all and may be amenable to giving you some relief. Work both ends to identify the best opportunity for savings. A broker can help.

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