Subletting office space

Posted On Friday, 22 February 2002 02:00 Published by eProp Commercial Property News
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A growing market in sub-let commercial office space as a result of the difficult trading climate is creating new leasing trends in the property market. 

Rodney LuntzIn current conditions, sublet space provides a very real alternative to conventional leases, one in which all stakeholders stand to benefit, says Rodney Luntz, of property consultants Abro-Luntz.

Luntz says the driving forces behind the trend are readily identifiable. Many businesses are under pressure to contain costs and need relief on their cash flows, he points out.

'Typically, however, they are locked into long-term leases. Sub-letting provides a way of offsetting costs while maintaining the lease's status quo.'

At the same time, he says, landlords are seeking to secure their income streams from tenants. Given that there are companies that are not prepared to commit to longterm leases at this stage of the business cycle, sub-letting offers a solution.

'Sub-lessees have the advantage of premises that are fitted out or can be customised, and they can negotiate shorter lease periods. The problems of oversupply besetting the commercial property market in general at the moment apply equally to the sub-letting market.'

Although ideally the markets effectively complement each other, Luntz says there will be cases when lessees go head-to-head with landlords for substantially the same market. The choice thus lies very much in the hands of the third-party tenant.

'In that case, sub-lessors are at a disadvantage as they do not have the financial muscle to compete with landlords and they are not in a position to offer the same kind of incentives. In other words, it's a classic tenant's market and the opportunities are there for excellent lease deals, both with direct leases and subleases.

'But tenants or sub-lessees should do their homework and avoid rushing willy-nilly into deals without expert input and interventions with landlords on their behalf,' Luntz says.

Last modified on Thursday, 22 May 2014 16:43

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