Subleasing and Direct Leasing Comparison | FirstBase

What is Subleasing?

Subleases are leases made by a tenant to a subtenant. Instead of a two-party tenant-landlord relationship (a direct lease), subleases involve at least three entities, with the tenant acting somewhere between landlord and middleman for the actual occupant of the space.

Cost and convenience can make subleases an attractive option for small businesses looking for a way to scale up office space in a hurry. Still, they come with some caveats, and it's always best to weigh the pros and cons before closing on one.

Subleasing: Pros and Cons

Pro: Subleases don't require the long-term commitment that direct leases often do. If you're looking for a temporary office, or plan to quickly scale past one, a sublease may make sense for you.

Con: Since your sublease will be governed by the terms of the original lease, you'll have to wait for the original landlord to sign off on it. This does not always happen quickly; approval can easily take up to a month after the original sublease is signed.

Pro: Many subleases will be furnished. If not, you may be able to negotiate with the tenant to get wifi and other necessities running from day one.

Con: The chain of command can slow down maintenance. Any requests will likely be routed through the leasing tenant to the office's landlord.

Pro: Subleases tend to be less expensive than direct leases. The drop in price comes largely because tenants are aware that any subtenant will be assuming some risk (see the next con) that wouldn't exist in a direct lease.

Con: So, about that risk we mentioned – subleases aren't just contingent on the subtenant; instead, they can be compromised by any issues with the leasing tenant. A tenant's poor credit, shutdown, or just generally bad lease management can all negatively impact the subtenant.