Compared To Sublease

Executive Space or Sublet Office Space?

Sublease sounds like a great deal – until you consider what makes the ‘great’ deal possible. In most cases, a sublease option arises because an existing tenant has downsized and no longer needs all of the space they are obligated to pay for during the remainder of their lease term. Since no business person intends to lock themselves into paying for space they no longer need, this means that, right from the start, you’re entering your business in the middle of someone else’s negative circumstance. Landlords have little motivation to offer concessions or otherwise display flexibility with a sublease, since the primary tenant is obligated to pay for the space either way.

In addition, a sublease means multiple parties are involved in approving and managing the relationship to begin with, and your standing as a tenant is often less-than-clear. Furthermore, you’ll be signing a sublease with a party that probably has little to no experience managing a lease to begin with, so if something goes wrong there’s no guarantee that they will be able to respond effectively. If your primary tenant doesn’t pay its utility bills or common area charges, for example, the impact on your business could be devastating.

Interestingly, one of the often-hidden risks with a sublease is the complexity of working around another organization’s culture, which many organizations discover can be problematic only after they move in. If an employee of the primary tenant consistently fails to lock a door or turn off the lights at the end of the day, thus exposing you to security risks or increased operating costs, what is your recourse? In an executive space, all tenants must abide by certain businesslike standards of conduct, and security and operating support are handled by on-site professional managers. With a sublease, you gain none of those protections.

The greater the ‘deal’ on the sublease, the shorter the term – or the more distressed the primary tenant. Either way, unless it’s a sublease with an entity you know well or you have professional real estate expertise in-house or of counsel through your attorney, for small businesses a sublease represents a high degree of risk. While a sublease could work out flawlessly, in the end the cost savings comes with a lack of control that could be enormously detrimental to your business.

With executive space, you gain the flexibility associated with a sublease but for good reason – because the entire environment and process are designed and structured to support organizations like yours.

Here are a few questions we recommend you considering before entering into a sublease:

  1. Have you ever occupied Sublet Space?
  2. Has the landlord outlined the risk vs. reward for you?
  3. Have you calculated your capital outlay costs?
  4. How valuable is your time?
  5. Do you have time to wait for the transaction to be completed?
  6. Is the space ready for move in, or do you have to re-configure the space?
  7. Do you understand your potential credit liability with Sublet Space?
  8. Do you understand what happens if the Lessor goes out of business and/or defaults on the lease?
  9. Have you had a conversation with the Landlord regarding your liability as a Sub-lessor?
  10. Are you prepared to move your business with little or no notice, upon request of the Lessor?
  11. Do you see your business going through any changes within the next year that would warrant flexibility in upsizing or right sizing your office space?
  12. What restrictions will you inherit from the Lessor?
  13. Do you or someone else in your company have to manage the Sublet Space?
  14. Do you understand that most state laws require no notice provision for Sublet Space?
  15. Do you understand that the Lessor can pass along cost increases at any time, without notice?
  16. Do you understand that if you do not sublet the entire space, other portions of the space could be leased at any time to any company and affect your privacy?

If you do not have good answers to the questions above, we highly recommend you ask the landlord before you sign any paperwork. Don’t let the low monthly cost of a sublease cost you a lot of money down the road. With Executive Space, you don’t have to worry!


Office Options Compared:

Sublease vs. Executive Space

Requirement Sublease Executive Space
Professional address Challenging to find best location Standard
Flexible terms None; landlord controls renewals and terms
 Standard
Tenant fit-out None; subject to primary tenant configuration
 Standard
Procure furnishings Costly and time-consuming Standard
Arrange security Technically challenging Standard
Cleaning services Costly for small space Standard
Telecom/Internet Must set up and configure Standard
Conference space Sometimes available
 Standard
Expansion options Renegotiate or move Available
Support services Separate labor and hiring cost Available
Time to move-in Technology installation and lease execution could last months
 Instant