The first thing you need to confirm is that your lease gives you the right to sublease your space. Most leases will specify that the Landlord reserves the right to review the Sub-Tenant’s use of the space, and the financials of the Sub-Tenant. The lease may also include a sublease approval fee which should be factored in.

Most Tenants approach a sublease scenario with the goal of breaking even on their monthly real estate costs. If your lease was negotiated at a down time in the economic cycle your current rent may be below market. If your lease does not prevent you from profiting from a sublease then your lease can be an asset. Most leases prevent Tenants from retaining sublease profits.

Even if you have two years or less left on your lease there are still benefits to subleasing your space. Once a Landlord knows the Tenant intends to sublease and there is no chance of retaining their tenancy; the Landlord shifts their focus to backfilling the space with a new Tenant. Particularly if the Tenant is creditworthy the Landlord will consider terminating the current Tenant’s lease in order to do a long term direct deal with the new Tenant.

The best case scenario for the Tenant is for the Landlord to terminate their existing lease and do a direct deal with the new Tenant. This releases the original Tenant from a potential liability of having to find another Sub-Tenant if the original Sub-Tenant were to default in the future. Credit worthy Sub-Tenants that are willing to sign long term leases are a great asset when negotiating a lease termination with the Landlord.

If your company has five (5) years or more left on your existing lease then the most likely scenario is a traditional sublease scenario rather than the new Tenant doing a direct deal with the Landlord. In the event that the Sub-Tenant needs modifications to the space in order to occupy the premises there are a few ways this could be handled. Rather than paying for specialized improvements that may hold no value if the Sub-Tenant defaulted, reduced rent for a period of time could be offered instead in order to offset Tenant Improvement costs. If the market is strong enough you also maybe able to negotiate an “as is” deal with the sub-tenant being responsible for the cost of any Tenant Improvements.