How to Sublease Your Unused Office Space in Texas

The COVID-19 pandemic disrupted typical American life in almost every way. Businesses have felt the severe blow of this impact, from drastic sales losses to massive layoffs. Yet business owners still face office space rental leases. Many are wondering how they can pay on these leases without going broke. Here, we look at ways to sublease your unused office space to help you mitigate the financial impacts of the Coronavirus shutdown.

If your office space rental agreement allows you to sublease, you can rent out unused portions of your office to other businesses looking to downsize. Subleasing is an excellent option to help alleviate your business’s financial strain. As earning plummet in the face of the pandemic, many companies are looking to subleasing to pay the bills.

The Work-From-Home Shift

Work from home_office space rental As COVID-19 took hold across America in early 2020, many businesses shut down. Some laid off large swaths of their workforce. Even as many return to work, the national unemployment rate still hovered around 11% as of this writing.

Those who remained on the payroll left their offices, swapping conference rooms for Zoom meetings from the kitchen table.

Even as some businesses begin allowing employees back to the office, COVID-19 continues to be a concern. Many property owners, property managers, and business owners have strategic health and safety plans in place. Even so, many employees and their managers hesitate to return to an office environment. According to one poll, as many as 58% of Americans say they think it’s “risky” to return to their jobs.

Because of continued economic impacts and health concerns, many businesses won’t reopen any time soon. Many economists believe the work-from-home environment is here to stay, at least for the foreseeable future.

Work-from-home environments benefit both employees and employers in several ways:

  • Reduced office capacity means business owners can reduce overall costs. Office space is expensive. But those who can either break a lease or sublease their office space can save money, retain more employees, and keep their businesses operating.
  • While employees had difficulty adjusting to at-home environments at first, many have established new routines. Employees are largely enjoying telecommuting, and many say they would continue to work from home if given the opportunity.
  • Returning to a traditional office environment during a pandemic means costly renovations, additions, and considerations for business and property owners. Workstations and desks will have to spaced far apart. Cleaning crews and disinfection protocols will work overtime. And employers will have to purchase hand sanitizer, extra cleaning supplies, and other items to ensure employees stay safe. Working from home eliminates these costs.
  • Despite initial reports, working from home increases worker productivity in many cases – sometimes by as much as 47%.

All that said, many businesses are choosing to keep employees home. However, for those still stuck in a long-term office space rental agreement, that can be problematic.

Should Your Business Sublease Office Space?

If your business rents office space, you’re likely facing economic hardship because of the novel Coronavirus. Perhaps your earnings have plummeted, causing layoffs and furloughs. Or, maybe most employees are working from home, leaving you with unused office space and mounting rental bills.

One solution is to sublease your unused office space, whether in Texas or another part of the nation.

If you’re already committed to a long-term office space rental agreement, subleasing your office space (renting unused office space to a separate tenant) can help lessen the financial burden. Often, termination fees will make exiting your lease financially impractical. However, subleasing to another business can reduce your financial burden while ensuring you meet the obligations of your contract.

If you need to downsize your office space, but can’t get out of an office space rental agreement, you might consider subleasing. This option allows you to downsize or move your business to another location while still paying rent to the property owner.

Sublease Considerations

Man in empty office space Before entering into a sublease agreement with another business, know your responsibilities under the initial lease agreement. As the primary lessee, you are responsible for any repairs, damages, late fees, utility overages, or other financial obligations. Even if your sublessee damages the property, you will ultimately be responsible for those costs.

In addition, you must consider your lease agreement terms before subleasing to another tenant. Read your office space rental agreement to see if you’re allowed to sublease. Some contracts may permit you to sublease, but prohibit subleasing to a tenant with a low credit score. This restriction can potentially limit your ability to sublease.

Finally, always communicate with your landlord. Even rental agreements that allow a tenant to sublease typically require express written consent from the landlord. Failure to comply with your lease agreement could lead to legal trouble, additional fees, and logistical headaches. Always communicate your intentions with your landlord and get their approval first.

The Commercial Sublease Agreement

Before you consider a sublease, get approval from the property owner or property management company. Your original lease may prohibit entering into a sublease with another party. However, in this economy, many property owners are also struggling financially. Approach the owner or property management company with a commercial sublease proposal. The owner might consider renegotiating your lease terms to allow for a commercial sublease agreement.

Once the owner agrees – or you verify a sublease is allowed under the terms of your current lease – have a professional real estate attorney or another real estate professional draw up a commercial sublease agreement.

Remember, even if your sublessee doesn’t pay the rent, you’re still responsible for paying the property owner. Therefore, it’s crucial to thoroughly examine the sublessee’s financial situation, do background checks, and ensure they will pay the rent. Perform due diligence, even if it takes longer than you would like. By confirming your sublease tenant is financially stable and dependable, you will also protect your business’s finances.

If you’re confident that the sublessee will be a reliable tenant, sign the commercial sublease agreement.

Our expert property managers and commercial real estate leasing teams can walk you through the sublease process. Contact us today to learn more about subleasing your office space. We can identify reliable tenants and help you create a commercial sublease agreement that serves both parties.

Office Space Rental Options

Once you receive the green light to sublease your office space, it’s time to decide what happens next. You might sublease most of the current office space, saving only a small portion for your business’s use. Or you might sublease a small area, keeping the majority for yourself.

However, if your business needs to downsize, or eliminate in-office workspace all together, it is possible to sublease your entire office. In this case, you can choose to work 100% remotely or rent a separate, more affordable office space for your employees.

 

Are you a business owner interested in subleasing your unused office space? CXRE can help you navigate the process. Contact us today to speak with one of our experienced commercial real estate professionals.

Share This

CXRE » Commercial Real Estate Investment » How to Sublease Your Unused Office Space in Texas