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A NY Office Sublease can vary in terms of its length, size, pricing, the physical condition of the office and what’s included. Two important elements to examine when evaluating a Sublease are: (1) What is the financial condition of the Sublessor- that is the company that “gives” the Sublease; and (2) What is the Sublessor’s motivation.
Subleasing office space from a financially strong and credit worthy Sublessor (also called a “Sublandlord”) is very important. If a Sublessor defaults on its obligation to pay rent to the Building Owner (also called the “Over-Landlord”) your business (called the “Sublessee” or “Subtenant”) can be evicted. Although a Sublessor is unlikely to make its financial statements available for review, your due diligence should include common-sense observations of the business, credit reports and inquiries made to the Building Owner about whether rents have been paid in a timely manner.
A Sublessor’s reason for subleasing its space may include the need for: (1) An alternative office with more space to accommodate business growth; (2) An alternative office with less space to address a business contraction; (3) Relocation due to a merger, acquisition or a change in territory; and (4) Offsetting the cost of its remaining lease obligations when a business is closing. Obviously, scenarios (2) and (4) present a more significant risk of the Sublessor defaulting. There are a number of strategies for mitigating Subleasing risks. For more information link to our blog Sublease Risks and Rewards.
At any given time there are hundreds of NY Office sublease spaces available for rent. According to Costar, the commercial real estate information company, there was 8,144,652 SF of sublease space for rent at the end of September 2014.
As a general rule of thumb: (1) Subleases are priced below the market rent for comparable office space offered directly by a Landlord; and (2) The shorter the length of the term remaining on a sublease, the greater the discount. Notwithstanding, in markets where the demand for space exceeds the supply, and (or) in the case where the Sublessor has invested substantial sums of its own money finishing the space, the price of the sublease may be greater than the market rent for comparable space offered directly by the Landlord.
The experienced Tenant-Representation Broker Cogent Realty Advisors can help you navigate the market and identify the best quality NY office sublease spaces. Phone today: (212) 509-4049.
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