Your landlord’s only business is making money in exchange for space. They don’t want any competition and they most certainly don’t want you making more money off of your space than they would.
They will put all sorts of failsafe measures in place to try to stop you from subletting your commercial space, and most likely fill your lease with deterrents.
However, some of these have a backdoor and you can still get away with leasing your space, albeit not for much (or any) profit to you. To help you find a way, here are some tips on subletting commercial space and some of the most common terms you will see in your commercial lease.
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1. Cannot Discount Your Net Rent
As we said, your landlord does not really want you to offer this space at a rate lower than they could offer.
There are several ways around this by sweetening your deal elsewhere. Let’s say you’re currently paying $125.00 a square foot. You would love to attract sublets by offering it at $100.00 per square foot, but that would be a discount and you can’t do that. You can, however, offer a month or two of free rent as a cost-savings incentive. Or you can get creative and offer things to make the rate more agreeable, as long as these incentives don’t go against anything else in your lease terms.
2. No Subletting, if the Landlord Has Competing Space
It’s almost impossible to define exactly what a “competing space” is in this regard.
In theory, any other space in a large mall could be considered competing, even if one is a 700-foot office space upstairs and the other is a 2700-foot restaurant space on the ground floor. Something on the same block could technically be considered competing.
For this reason, we typically advise our clients to negotiate to remove this from the lease at the very start, or at least have it removed after you have renewed.
3. Subtenant Must Be at Least Your Financial Strength
Your landlord wants the sub to be at least as stable and reliable as you are. However, the better your credit is, the more difficult it is to find someone at the same level or better.
If this is the situation, you can typically work with your landlord to establish middle ground, if you can prove that your candidate may not be at your level, but still appear to be strong enough to reasonably handle the lease terms and rent.
4. Must Sublet the Entire Space
This one can be tough. Sometimes you sign on for 10,000 square feet and see that you’re realistically only using 8,000. Maybe you’re a sports therapy clinic and you would love to offer that extra 2,000 square feet to a nutritionist and create a synergy.
Sadly, unless you can get your landlord to outright throw away this clause, you’re stuck with the extra space.
These are just a handful of things you need to be aware of when signing or renewing a lease. You may not know something is hidden in your lease until it comes to the surface to trap you in some way.
This is why we always recommend working with a commercial lease expert who can spot potential issues and help you avoid potential roadblocks.
In the case of a sublet, you may not know that you need their help until a year or two into your lease. So reach out today!
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