If you’re serious about saving, Manhattan office sublets deserve a look.
Recently, we detected a significant increase in available sublets, which are priced considerably below the rental rates for direct space. We expect more space to come on line as financial firms consolidate and look to dispose of space. We have many years of experience in finding and structuring sublet arrangements. Accordingly, if you are thinking about making a move or want to jump-start a new venture, you should give strong consideration to sublets. They are usually better economic deals than direct space, both in dollars saved in rent and in capital required for renovations. A sublandlord usually wants to minimize its financial obligation and is not concerned with the market perception of a reduced rent. As a result, sublandlords frequently offer space at a lower rent than they are paying the over landlord.
What’s the catch? While there are some risks involved, they usually can be managed with a well-constructed deal that protects the subtenant.
The primary issue is the credit risk. Sublandlords are often in a weak financial position. They want to sublet their space because they are downsizing. In the event of the bankruptcy of a sublandlord, a subtenant could lose his security deposit and even, possibly, his lease position if space is recaptured. Over the years, we’ve developed strategies to help our clients minimize the risks of sublets.
Timing. The documentation on sublets can take time to complete due to the need to obtain the landlord’s consent. Usually, landlords have 30 days to review the lease and give consent. While some landlords act very quickly, others are not as helpful. On the positive side, the sublease document itself is far simpler than a direct lease.
In well-selected situations, the subtenant is in a strong position because neither the sublandlord nor the landlord wants the space to remain vacant. A potential tenant can use this leverage to negotiate positive terms and win great space at a below-market rent. Subleasing is an important option every tenant should consider.