A business looking for a good real estate deal should always be open to a sublease. This arrangement can be a bit complicated because it is really a deal between three parties: the tenant currently occupying the space, the landlord who must approve the deal and the subtenant. But the economic advantages can easily outweigh the aggravation of getting all of the parties aligned.
When negotiating a lease, the property owner – the landlord – is first and foremost concerned with the value of their property. The rent rate negotiated translates into net operating income and that is a key factor in calculating value. This is why landlords will offer free rent in order to keep the rent rate as high as possible.
For a tenant looking to sublease, their focus is on cash flow: finding a subtenant to cover all or most of their remaining rent obligation. Negotiations with a tenant trying to sublease their space will be focused on their anxiety over paying rent for a space they are moving out of. The pressure is on to find a subtenant as soon as possible and stanch the bleeding. And a good broker should have the skills to leverage that anxiety to get the deepest discount possible in return for providing the immediate relief of a paying subtenant.
There is an important caveat that brokers should always tell their clients in this situation: that great sublease rate you were able to negotiate with the tenant might well go up when dealing with the landlord when you want to extend your lease at the property.
To summarize, when you’re considering a sublease, both carpe diem (seize the day) and caveat emptor (buyer beware) apply.