Sublease space, rented property in which the tenant gives up all or a portion of the designated space to a 3rd party, continues to be a hot topic in the commercial real estate market in Tampa. Although absorption rates have stabilized 
somewhat in the Tampa area, there still remains a considerable amount of sublease space in all the submarkets. Last we checked, West Shore had over 500,000 sq feet in available sublease space alone.
There is no question that subleased space can be considerably less expensive than renting outright from the landlord. Owners need to maintain pricing on their properties not only for future negotiations with other tenants, but also for refinancing with the banks. Sublessors, however, do not have the concerns of precedent that extremely low rental rates would create for owners. Sublessors are only concerned with reducing the costs of their current lease commitment.
Here are some examples of deals we have either been involved with or know of in the last year:
| Size | Location | Original Lease | Sublease | Term Remaining | Type |
| 2000 sq | 301 Corridor | $12/sq | $7/sq | 30 mo. | Flex – Industrial |
| 5000 sq | West Shore | $28/sq | $15/sq | 24 mo. | Class A Office |
| 1400 sq | Downtown – Core | $20/sq | $10/sq | 24 mo. | Class B Office |
| 8000 sq | Rocky Point | $30/sq | $20/sq | 24 mo. | Class A Office |
We know the primary reason subleasing is attractive….pricing and affordability. But, there is downside risk that should be considered.
- Default by Sublessor – The legal agreement with the owner of the property is with the original tenant. More often than not, the deal is structured so that the sublessor is paying the difference between their rent agreement with the owner and their agreement with the sub-tenant. In the event the sublessor defaults to the owner, the owner will come to the subtenant to pay for the entire lease. In all probability, the sublessor defaults because their business is in financial jeopardy, making the likelihood of financial remedy improbable.
- Chargeback’s/Expensive Provisions – Leases can be very complicated. It has always amazed me the types of poor deals that people negotiate (usually businesses trying to negotiate without the assistance of a good broker or attorney). The Sublessor might try to pass on these disadvantageous terms to the subtenant.
- Term of the Sublease – The vast majority of subleases is short term (less than 30 months). Short terms can be terrific for a start up business or a company that is rapidly expanding. For an established company, however, a short term can mean higher expenses. Moving a company can cost HUGE dollars and these costs should be considered in the analysis of whether a sublease is a good fit or not for any given business.
Sublease Space Continues to Dominate Talks in Tampa CRE Market
Sublease space, rented property in which the tenant gives up all or a portion of the designated space to a 3rd party, continues to be a hot topic in the commercial real estate market in Tampa. Although absorption rates have stabilized
somewhat in the Tampa area, there still remains a considerable amount of sublease space in all the submarkets. Last we checked, West Shore had over 500,000 sq feet in available sublease space alone.
There is no question that subleased space can be considerably less expensive than renting outright from the landlord. Owners need to maintain pricing on their properties not only for future negotiations with other tenants, but also for refinancing with the banks. Sublessors, however, do not have the concerns of precedent that extremely low rental rates would create for owners. Sublessors are only concerned with reducing the costs of their current lease commitment.
Here are some examples of deals we have either been involved with or know of in the last year:
We know the primary reason subleasing is attractive….pricing and affordability. But, there is downside risk that should be considered.