Tips for Office Subleases

We’re in the process of securing a new office for early next year and I wanted to share some tips I’ve learned over the years when it comes to offices and subleases:

  • Offer much lower than they’re asking as it’s a sublease and they likely already have a new lease, especially in this soft commercial real estate market
  • Try to offer a deal when your company grows into the space over time e.g. pay for 50% of the space the first six months, 65% the next six months, 80% the next six months, and the full amount the remainder of the time
  • Shorter subleases will result in better deals as companies don’t like moving very often

I’ve found that you can consistently rent office space for 50% of the market rate using these approaches during normal market conditions.

Commercial Real Estate Economic Nonsense

Our office lease ends in six months and we’re in the process of looking at lease options. We have an amazing office now (MTV’s old office) and would like to extend the lease for one year. The building won’t do it — they won’t do anything less than a two year extension. They claim that they are worried that with all the new buildings coming on the market they’ll be left with more empty space and want to solidify longer term deals now. Wait, we’re offering to pay hundreds of thousands of dollars to them for a space that is going to sit empty indefinitely and they are saying no. It doesn’t make sense.

My take is that the building management companies are so far removed from the building ownership companies that are so far removed from the pension funds that own it that there is a moral hazard of sorts. Economic wastefulness continues to amaze me.