If you are among the countless businesses that have been forced to lay off or furlough employees during the COVID-19 pandemic, you may have found yourself with too much office space—especially if much of your remaining workforce is still working remotely.
Landlords are in the precarious position of balancing their own interests with tenant interests, and are often unable to accommodate early lease breaks. This leaves tenants renting too much space with just one solution: subletting their excess office space to other businesses.
Subleasing office space is also a viable option for businesses who are able to get out of their current leases and want to rent a smaller, more affordable space. In either case, subleasing during COVID-19 is a promising solution for businesses of all sizes and in all industries.
Subleasing: The Basics
To start, let’s define what subleasing is, as well as what it isn’t. In a sublease, the original business tenant transfers a portion (or in some cases, all) of the rented space to the new tenant, while retaining the rights and responsibilities of that lease agreement. Generally, the original tenant will continue to pay rent to the landlord while collecting rent from the subtenant.
There are many ways to structure a sublease: the tenant might rent out a percentage of the office space to the subtenant, or they may rent out the entire space for a term that is one day less than the lease term. Both examples qualify as subleases, since the original tenant is remaining a level of interest in the lease and the subtenant is not engaging in a contractual relationship with the landlord.
By comparison, if the original tenant transfers all of their rights and obligations to the new tenant, this is no longer a sublease—it is an assignment. In this case, both the original tenant (now the assignor) and the new tenant maintain a contractual relationship with the landlord. There are pros and cons to assignments as well as subleases, but your best option will depend on the details and allowances of your lease agreement.
Considerations for Subleasing During COVID-19
If you are a tenant considering renting out your extra office space, it is important to first review your lease terms. What does it say about your right to assign or sublease the space? While many commercial leases do permit subleasing, landlord approval is usually required.
When drafting the sublease, it’s essential that both parties understand and agree to all terms laid out in the contract. Key considerations when subleasing during the COVID-19 pandemic include:
- How much rent will the subtenant pay to the original tenant per month?
- What percentage of the utility costs will the subtenant pay? The original tenant?
- Who will be responsible for obligations such as building maintenance—the original tenant or the landlord?
- What is the term for the sublease? What will happen when the sublease terminates?
Sublease Commercial Space in Northeast Ohio
Interested in subleasing commercial office space in the Northeast Ohio area? Cushman & Wakefield | CRESCO Real Estate has several properties currently available for sublease:
6095 Parkland Boulevard, Mayfield Heights, OH 44124
Beautiful, custom-designed office space with a combination of private offices and workstations with glass walls. Features high end finishings and premium amenities such as a large kitchen, gorgeous bathrooms, and an executive board room with 30’ conference table.
6180 Cochran Road, Solon, OH 44139
20,000 square feet of move-in ready, second-floor space available for sublease near downtown Solon, Ohio. Can be divided to 10,000 square feet if needed. The space is well maintained with updated finishes, excellent amenities, and close proximity to restaurants.
85 Executive Parkway, Hudson, OH 44236
Up to 7,000 SF available for sublease in a single story building with unique architecture. This newly renovated creative space had substantial tenant improvements in 2017 allowing for a highly modernized floor plan.
The building has attentive property management and easy access to Route 8 and Ohio Turnpike. The sublease expires in December 2024.
COVID-19 has certainly had a major impact on commercial real estate market conditions, but subleasing gives both tenants and landlords an opportunity to adapt.
To learn more about how CRESCO, Greater Cleveland’s leading commercial real estate company, can help you with your property needs, contact us at 216.520.1200, or fill out the form below. A CRESCO professional will contact you shortly.