The Boom and Benefit of Sublease Space

Today’s tenants face increasing uncertainty about future workplace strategies. With current pandemic-related challenges, many companies have not yet determined what workplace solutions will look like, amid looming lease expirations.

This may pressure firms to make decisions that may have lengthy and expensive implications, while not providing the flexibility to redefine how space will be occupied, says Doug Hellmann, architect and PDR principal and director of project delivery. Depending on the size of the company and the complexity of business needs, the sublease market could be an untapped solution, he says.

The availability of sublease space has been on the rise as corporations retract due to current economic challenges. This newly available space may provide the opportunity for companies to explore options for how employees work, how a corporate brand is represented and where space is located. All these factors will be critical as companies contemplate whether or not office space is required.

“A sublease may provide a tenant an opportunity to test new ways of occupying space,” Hellmann tells GlobeSt.com. “Is shifting from an open office concept to a private office model something to explore?  Or conversely, can private office occupants move to an unassigned seat sharing model that could reduce their real estate footprint? Exploring options in office and workstation sizes, conference room sizes/orientations and support space layouts could expose a better utilization in how the office is used. A sublease may provide beneficial options that uncover ways that improve on a company’s functional requirements. All are realistic and reasonable options to explore depending on the organization’s primary goals.”

Companies may also take advantage of a sublease to amplify brand presence through an improved building location or within a building, or an improvement in the quality of the space and location relative to core customers. Reaching customers through use of the company brand is key. By leveraging upgraded locations, a sublease may provide increased exposure to a target audience, as well as create a space from an interior design and brand experience perspective that may have positive impacts to the business and elevate employee pride, Hellmann says.

“This may be the time for some companies to take advantage of competitive sublease rates to upgrade to a nicer building that provides a better location or access, higher quality finishes and furniture, better amenities within the building or nearby, and better parking and/or improved access to public transportation,” Hellmann tells GlobeSt.com. “By elevating these qualities, employee occupancy rates may improve and visitor experience could be enhanced. Furthermore, during a competitive sublease market, building owners will also play a role in making their properties more desirable by upgrading common areas, improving infrastructure, and reassessing amenities and how they are delivered to the occupants.”

While the sublease market may provide competitive rates, this environment does come with tradeoffs for owners to consider, Hellmann cautions. For example, a lack of control of lease terms, lack of funding through tenant improvement allowances to make space revisions and furniture may or may not be provided. Even with these challenges, companies may find that market conditions and availability of sublease space could provide opportunities to elevate and explore future options at a reduced overall real estate investment.