Essential Guide to Find NYC Office Subleases: Tips and Insights

As you might imagine, there are many things to consider when searching for office subleases in New York City. First, remember that subleases fall into two categories: dedicated office space and shared office space. In the first scenario, the company that holds the lease with the landlord (known as the tenant or sublandlord) vacates the entire office space, and the office becomes the sole possession of the new tenant (known as the subtenant). In the second scenario, the tenant and the subtenant share the office space. For example, many law firms sublease office space to other attorneys. These subtenants rent private offices within the primary tenant's suite. 

Flexible Lease Terms

Sublease term and sublease flexibility are two factors to consider when you rent office space. If you rent a dedicated office space - not shared - the lease term is more likely to be a specific date. The date typically coincides with the lease expiration date of the tenant's master lease, i.e., the lease the primary tenant signed with the landlord. Therefore, the sublease term is unlikely to be a standard length; in other words, the length of the sublease depends on the remaining term of the original lease. It could be 13 months; it could be 7 years. While the sublease term varies, it's not a flexible lease term. 

However, if a company rents a shared sublet, there is often more flexibility with the term. The standard length of a shared sublease is one year, although it's sometimes a little longer or shorter. Most sublandlords prefer the initial sublease term to be a minimum of 12 months because it's usually not worth the hassle for something that may be too temporary. The juice is not worth the squeeze! However, it's common for a subtenant to continue subleasing month-to-month following the initial lease period. Once the sublease goes month-to-month, the subtenant typically must give 60-90 days' notice to terminate the agreement.

When you sublease an entire office space, there is less lease flexibility. What if your company doubles in size, needs more square footage, and still has 16 months remaining on the sublease term? What do you do then when legally obligated to pay rent until the end of the sublease term? One option could be to sublease the office space again, that is, if the master lease allows it. Like one more rung in a family tree, this scenario would make the subtenant the sub-sublandlord. A sub-sublease requires both the sublandlord's and landlord's approval. Another option could be to negotiate a lease termination. But be prepared to pay a hefty penalty. Besides sub-subleasing or writing a big check, you might not have many options. So keep in mind that a flexible lease term makes adding headcount easier. If you need maximum lease flexibility, a flexible workspace provider might be worth considering. 

Compatibility

There are other factors to consider when sharing office space with another company. The main one is compatibility. For example, a "vocal" sales team may not be a good match for an architecture firm that needs a quiet environment to work efficiently. However, an engineering firm subleasing shared office space from an architecture firm may be an ideal match, and the two firms may even have synergy and be able to refer business. So always take into consideration who you'll be subleasing office space from. 

Second Generation Offices

Office subleases are almost always second-generation spaces. This means the office was constructed to suit the needs of another company, and the subtenant will be the second company to occupy the office. Therefore, the trick to finding an office sublease in NYC is to find one with an existing office installation that works for your company in its current state. If you like the location of the office building but want to demolish offices, install more conference rooms, and update the kitchen, chances are that it's not going to work out. It's essential to find an office sublet with a layout that suits your company in its current condition. Construction work is exorbitant in New York City, and rarely will a sublandlord or a subtenant assume financial responsibility for office construction for a short-term sublease.

Don't Hitch Your Wagon to a Falling Star

The sublease agreement is only as strong as the sublandlord's credit. What does this mean? Well, if a sublandlord defaults on the master lease -- by ceasing rent payment to the landlord, for example -- the subtenant's occupancy under that agreement ends. It's a domino effect. The subtenant may be able to negotiate a new direct lease with the landlord, but the terms and conditions will change. In this scenario, the subtenant may have to pay an increased rental amount, whatever the market rental rates are in the building at the time, or be forced to vacate the office abruptly. It's crucial to always consider the financial strength of the sublandlord before signing a sublease. You don't want to find yourself in a predicament. 

Additional Expenses and Amenities

Companies search for sublets for several reasons. One is because office sublets usually cost less than direct office leases (where you sign a lease directly with the landlord). But the office rent cost or base rent isn't the only expense. Additional expenses may include electricity, cleaning, carting, internet connectivity, water, and tax increases, to name a few. In a dedicated office scenario, these additional fees typically pass through to the subtenant and become their responsibility. However, with shared office sublets, most of these expenses are included in the base rent. This is referred to as all-inclusive rent. 

When you sublease shared offices, you often get access to some office amenities. You may have shared access to conference rooms, phone booths, and a kitchen. Some supplies, like paper for copies or coffee and tea, may be included. 

The sublease clause is a section of the master lease document that outlines the rules and procedures a tenant must follow if they choose to sublease their office space. You find:

• Landlord's Consent. This is the big one. The vast majority of subleases require the landlord's written consent, which serves as formal approval for the sublease agreement. The landlord's attorney drafts the document, and all three parties must sign it, usually in this order: subtenant, tenant, and landlord. The delivery of the fully executed consent document to the subtenant typically signifies that the deal is closed. 

• Notice Period. A tenant often must give the landlord notice of their intention to sublease the office.

• Subtenant Information. This includes financial information about the company - tax returns, bank statements, etc. - information about the principals, current address, and website. The landlord vets everyone in the building, even subtenants. 

• Exclusive Agent. Sometimes, the landlord's attorney includes language in the sublease clause stating that if the tenant wishes to sublease their office, only the landlord's agent can represent and market the office sublet. It's prudent to push back on this -- why shouldn't you be allowed to hire whomever you like? Think about this. The landlord's broker works for the landlord and is much more motivated to rent the landlord's other vacant offices before a sublet that already has a paying tenant, i.e., you. The bottom line is you need a real estate broker who is 100% on your side.

• Legal Fees. The sublease clause will require the tenant to pay the landlord's attorney's fees for drafting and reviewing the consent document.  

• Sublease Profits. Occasionally, tenants are able to sublease their office at a higher price than their current rental rate. If there is a profit, the tenant is often required to share it with the landlord (after factoring in all the expenses associated with subleasing the office, i.e., brokerage fees, legal fees, rent concessions, etc.). More often than not, it's a 50/50 split, but it can also be 100% to the landlord or not specified, allowing the tenant to keep 100% of the profits. 

• Amount of Space. If you intend to sublease a portion of your office space, the sublease clause will often state what percentage you're allowed to sublease. Sometimes, a sublease agreement will prohibit a tenant from subleasing more than 30-40% of their office space in a shared office space situation. 

• Office Licensing. Some leases allow a tenant to license a portion of their office to another tenant, the licensee. A license agreement usually requires fewer approvals and formalities than a sublease; often, it only requires written notice to the landlord. Law firms often include a provision about licensing office space in their master leases because they often have a few extra offices and rent the excess to other attorneys. It's good to have a liberal licensing stipulation in your lease that doesn't require you to jump through a bunch of hoops to rent office space.

• Limit on Subtenants. The sublease clause usually has a provision limiting the number of subtenants a tenant can have. This condition applies to shared office space subleases. If you have five or six subtenants, you're basically running a coworking space at that point -- and most landlords won't allow it. 

When signing a new lease, your attorney should review the sublease clause carefully. It might seem insignificant at the time because the last thing you think about when you rent office space is subleasing it. But if you later find yourself in a situation where you need to sublease your office, you'll be glad you did.

Most commercial real estate websites include some sublets, especially the large sublets. If a prominent investment firm has 100,000 square feet for sublease in Midtown, Manhattan, it will be listed and included on all the major office listing sites. However, if a law firm has 2-3 extra offices for sublease within their suite, it's probably not listed.

Why do office leasing brokers frequently skip listing these smaller sublets? It's about deal value. The deal value of small office sublets usually isn't enough to justify a significant investment of the broker's time and energy. And if they do list your office space, you get what you pay for. It can be a lot of work. The agent must visit the office, take photos, create flyers and floor plans, send email blasts, show potential subtenants the office, negotiate the terms, walk it through closing, send commission bills, and then, to top it all off, split the commission with their brokerage firm. Major brokerage firms want their agents to spend their time leasing large spaces and collecting large fees. Sadly, the tiny ones don't pay the bills. 

As you might expect, companies looking for small offices in NYC often require more hand-holding throughout the process. It's usually their first time renting an office, so they have more questions and need additional guidance than seasoned companies renting an office for the umpteenth time. Unlike big real estate firms in NYC, we provide these smaller companies with the high level of service they deserve. Whether your company is looking for office space to sublease in NYC or has extra offices you want to sublease, we're ready to help.

Most of the NYC office listings on the OfficeSublets.com website are not on the market. Therefore, you'll find offices for sublease here that you will not find anywhere else. If you don't see a space that looks suitable for your business, complete one of the forms, email us, or do it the old-fashioned way: call! We have access to every office for lease on the market in New York.

Other Ways to Find Office Sublets in NYC

One of the best ways to find an office for sublease in NYC is to tap your network. Ping your old college chums. Create a post on LinkedIn about how you're searching for office space and want to share an office with like-minded people. Join a BNI networking group. Tweet it; Gram it; Shout it from the rooftops! 

Have you ever noticed that strange icon on your mobile device that looks like an old-timey phone your granny had? Hit that button and make some calls. Call your friends, past clients, and business associates. Do they have more space than they need and would like nothing more than to sublease office space to another firm? Need more people to call? Pick up the phonebook -- they still make those, right? Target businesses in industries you're interested in and located in your preferred neighborhood or building. Reach out to these businesses directly, as this proactive approach can open doors to potential shared office opportunities that align with your specific needs. When they answer, just say this: 

Do you have any extra office space you'd consider subleasing to another company? 

Background

A tech company located on West 36th Street between Herald Square and Penn Station was acquired when it still had over a year remaining on its office lease. The company evaluated its options and decided that subleasing the office would be the most cost-effective.

The Office Space

The company had a fully furnished office space with a glass-fronted conference room, a small meeting room, a kitchen, and a large bullpen with 21 wired desks. The office had central AC and a bright southern exposure that spanned the entire front side of the building. 

Conclusion

We marketed the office, found a suitable subtenant, negotiated the business points, and received the landlord's consent. All in a timely fashion. Subleasing their office space proved to be a strategic financial move, saving the company over $120,000 and providing the subtenant with a turnkey office in a convenient New York City location. It was a win-win.