It’s not always clear how subletting a commercial office space works, so businesses who are potentially interested can sometimes overlook the opportunity completely.
Depending on the space available and the size of the company wishing to sublet, it may be an attractive option for both businesses involved. To find out if it is suitable for you, here is an overview of how subletting works.
WHAT IS A SUBLET OFFICE?
A sublet office refers to an existing company leasing out part of the property to a new business (after being granted permission by the landlord). The property can also be sublet further by the new business to another party, creating a long chain of occupants and agreements.
In most cases, all subtenants will have to agree to the terms set out in the original agreement. Subletting an office can be a more cost effective option for the company wishing to move in and allow the existing occupying business to save on their own overheads.
However, there are not usually many sublet offices on the market. The legal process involved with securing a sublet office can also be quite long and complicated, which is not always beneficial for businesses looking for a quick solution.
WHY RENT A SUBLET OFFICE SPACE?
If you are wondering what advantages you can enjoy from renting out a sublet office space, you should take the following into consideration:
As is standard with any property you rent out, professional landlords will ask you to undergo a credit check as part of your application. In most cases if you have a credit score below 650, you are likely to be rejected for a traditional lease. However, those who aren’t professional landlords that sublet generally offer more flexibility. That means a score lower than 650 is often accepted, even if you have a poor credit history.
Lower up-front capital costs
Small businesses, in particular, often find the upfront costs of moving into new premises prohibitive. This typically includes two month’s rent as well as a security deposit that will be held throughout the duration of the tenancy. For start-ups it can be difficult to find this sort of money on top of all the other expenses that come with starting operations. Most sublets only require one month’s rent and the deposit – which can make a huge difference to your available cash flow.
Lower rent costs
You should be able to secure a sublet office space for a lower rental cost than the current occupant is paying. This is because you will only be renting out a smaller portion of the space and the monthly costs will reflect the square footage being used. For the current tenant, it also means their monthly overheads become lower, taking the strain off their budgets.
A sublet office space is usually turnkey ready, meaning everything is in place for you to move in and get straight to work. Therefore, you do not have to spend on expensive fit-outs or install the infrastructure such as internet and telephones that will be essential to making your business operational.
A lot will depend on the type of facilities already on offer in the existing office and whether any additional terms are agreed to in the sublet contract (although this is rare). In general terms, you should expect to have access to:
- Office furniture: Chairs, desks and basic furnishings
- Wi-Fi/Internet: Subletting companies will be able to access existing Wi-Fi/internet facilities
- Inclusive bills: Water, electricity, internet, heating and phone rental should all be included. Additional charges for external phone use will be payable by the subletting firm.
- Facilities management: Extra charges may be applicable for maintenance, cleaning and access to business services such as postage, faxing and use of meeting rooms etc.
WHAT SHOULD I CONSIDER WHEN SEARCHING FOR A SUBLET OFFICE?
There are three main things to think about when searching for a sublet office.
Time and patience
There aren’t many sublet offices on the market, so finding the right one at a price you can afford may take some time. You also have to factor in the complications involved with the legalities which can slow things down even further. In many cases it can take up to 3 months to close the deal, which may not be suitable for companies looking for a fast solution.
It is unlikely you will be able to negotiate any of the terms in place on the existing tenancy agreement. Of course, you will be able to review your sublet agreement (via a solicitor) but even if you don’t like a term agreed to by the existing tenant, you won’t be able to renegotiate. While this may be fine for some businesses, it ultimately means you don’t have full control over the space you will be operating from.
Wherever possible it pays to have a good idea of the relationship between the current tenant and the landlord, as it can affect your stability in the space. Find out why the tenant is subletting. Are they facing legal or financial issues? Or do they just have too much spare space? The more you know about the stability of the company, the more reassurance you will have knowing that you won’t have to unexpectedly move out again.
WHAT ARE THE CONTRACT TERMS?
The details of each subletting contract will vary depending on the terms in the original agreement between the tenant and the landlord. As mentioned above, this means sublet terms are rarely open to negotiation, so if the prospective subletting tenant does not find them favourable, they will either have to accept or look elsewhere.
This also means that should the original tenancy agreement come to an end, the subletting contract also terminates at the same time. Providing that the original tenant doesn’t leave the premises before the end of their contract, the subletting firm will also be able to remain operating in the space for that same period. Whether that is one year or longer will depend on the terms agreed to in the original tenancy.
Looking for sublet office space? At Prime Office Search we have a variety of flexible office spaces available to suit all business sizes and requirements. Browse our office spaces online or call us on 08004337888 and one of our experienced consultants will help you find the ideal office space for your business.