This cost-effective strategy can have great impact on the success of any business that requires office space
For business owners looking for strategies that eliminate unnecessary overhead costs, subleasing might be the solution that could quickly increase profits or save a company all-together.
Back in 2013, the New York Times published an article “Sublets Lure Manhattan Startups.” The piece highlighted the affordability and advantages of subleasing to those conducting tech businesses in the high priced real estate market of Manhattan. But what does the popularity of subleasing mean for established business owners in other industries?
First, subleasing can immediately shrink expenses – there is hidden money to be found by restructuring the costs associated with occupying their office space. Typical subleases can be obtained below market cost because often times the existing tenant is not trying to make a profit.
“People who sublet don’t save hundreds, it’s thousands and sometimes tens of thousands per year. In fact, there are cases where companies have saved hundreds of thousands,” said Kristine Scheufele of International Properties Group. “All it takes is a well thought out plan. And that’s what I enjoy about subletting – finding ways to save companies money.”
According to Scheufele, this “hidden money” could be an alternative to laying off a lot of people.
For every 1000 sf that is subleased, approximately 40k is saved in NYC,” she said. “That’s equivalent to an annual salary.”
“No two sub-leasing clauses are alike – they have to be interpreted,” Scheufele said. “A recapture clause can be triggered if you’re not careful. To ensure you’re well versed in all of the lease contents, look for qualified representation to explain your situation and negotiate the details with the landlord.”
Despite the necessary paperwork, subleasing is usually a quick process. When facilitated by a real estate professional who understands how subleasing works, the transaction can run smoothly and not cost the business owner extra time.
The right real estate professional can assess the best spaces on the market, and knows where to look. “It’s important to help a client or business owner sublease an attractive space, in a timely manner,” Scheufule said. “A priority is finding an office that is most appropriate for the business that will be operating in the space.”
With the natural ebb and flow of business being driven by a diverse set of variables each quarter, subleasing allows companies to adjust to changes that affect their financial well-being.
“Every company goes through stages, sometimes the changes are due to negative factors, and quite often due to positive factors. In either scenario, a company should look towards subleasing as a means to help them,” said George Donohue, president of International Properties Group.
Having served as the head of real estate for the original World Trade Center in Manhattan, Donohue has seen businesses all over the world experience unique scenarios.
“If a company hits some tough times, it can quickly sublease unnecessary space and save substantial money,” he said. “If a company is growing and in need of larger space, the subleasing strategy may be the fastest and most lucrative way to expand their business.”