Sub-Lease
Sub-Lease transactions involve three (3) parties.
Sub-Tenant
Sub-Landlord
Landlord
Sub-Leases are great options for early stage company’s looking to align a lease term with current runway or company’s simply seeking turn-key space, a below market deal and/or limited CapEx.
Sub-Leases offer a unique set of positive factors worth considering when determining the right deal structure to pursue.
Postive Factors:
Sub-Leases are often turnkey spaces, saving A LOT of time and money by eliminating the need to build and furnish space.
Sub-Leases typically have a specific fixed term or flexible term which can align well with a company’s desired deal structure.
Sub-Lease rents are commonly below Direct market rents (but not always).
The combination of these three (3) positive factors can be a unique opportunity when compared to the Direct Lease and Flex Space market.
There are however a few tradeoffs to consider when determining the right deal structure to pursue:
Negative factors:
A Sub-Tenant will be inheriting a pre-negotiated Master Lease, limiting the Sub-Tenants ability in contract negotiations.
The Sub-Lease transaction will require a Landlord Consent process following Sub-Lease execution. Landlord Consent typically take 30 days to complete, which adds an unpleasant delay for Sub-Tenants eager to start occupying the space immediately.
Becoming a Sub-Tenant, instead of a Direct Tenant, can create a relationship buffer between the Sub-Tenant and Landlord, at times making building operations and services less convenient as a Sub-Tenant.