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Entries Tagged as 'Sublease Office Space'

Have You Considered Renting Sublease Office Space

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So you know you’re ready to be renting office space for your small business. Perhaps you’ve even looked at some office spaces, and you’re chatting with other entrepreneurs you’ve met along the way, who are thinking some of the same thoughts—they’re also ready to make that jump from home to rent an office space. Don’t presume that this means you’re in competition with them for the few small office spaces available in town. Instead, think about whether you might want to get together with one or two of those entrepreneurs and rent some office space to share together. Sort of like a coworking office, but a situation where you would have control over choosing your fellow businesses. Here are some questions to ask if this thought intrigues you.

  • Are your businesses compatible, even complementary? For example, say you have come up with the latest and greatest software program for homeowners to envision what a home remodel might look like. You might want to share an office with another software company that has created the latest and greatest app for restaurant supply purchasing; you would benefit from bouncing software ideas off each other, but know that you wouldn’t be in direct competition with each other. Or you might want to share an office with an interior design company and a startup that sells imported fabrics or custom made drapes and pillows, which would also be complementary to your remodeling software.
  • Do you want to take the lead, and sublease—and is that even possible? The advantage again would be in the measure of control. Alternatively, your two or three businesses could form a collaborative and approach the rental market together, and be equally responsible when signing the lease and making the arrangements.
  • Are you ready to make a commitment? This is, of course, the most crucial question. Leases are not as much of a commitment as a purchase, but it would be a big step forward from a home office. The advantages of having a professional working and meeting space are not to be underestimated, especially if you need to meet with a lot of clients.

So if you are ready to even consider this alternative to a coworking office, contact us today for further discussion and to see what types of office rental spaces might be available in your market.

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By: James Osgood

Office Rental , Office Space , Sublease Office Space

What Do You Want? An Office for Rent or Office for Lease?

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These terms, office for rent and office for lease appear to be inter-changeable to most people outside of the commercial office space industry. Probably the best place to start is in in defining what the differences are in an office for rent vs. an office for lease. When those of in the industry hear these two terms, they mean different things. To many outside of the industry they seem to be the same. The primary difference in the terminology is that an office for rent refers to a shorter period of time in which you are committed to pay rent. This typically ranges from month to month up to about two years. On the other hand, when those within the industry here the term office for lease, we generally understand it to be a longer period of time in which you are committed to pay rent; usually in the neighborhood of 3 to 5 years.

There are many options for businesses looking at finding an office for rent. Very often it is more difficult to find conventional office space for rent since landlords are typically looking for a longer-term lease, but there are many other alternatives for businesses looking for an office for rent. These office rental options typically range anywhere from a month-to-month to a year commitment. They include:

  • Executive Suites: An executive suite allows a business to rent an office within a fully managed office environment. In most cases a physical office will be rented and exclusively available for your use.
  • Virtual Offices: These are typically provided by executive suite operators and allow businesses to use the executive suite as their mailing address. They also provide the ability to use an office or conference room on an as needed, as available basis.
  • Coworking Spaces: This is the new kid in town and is very similar to and executive suite except that it is less formal, less expensive and focuses on collaboration between those that rent space in them.
  • Subleases: When you sublease an office, you are renting office space from a tenant with the landlord’s permission. This can be a somewhat risky endeavor in that if the tenant you are renting space from does not pay the rent or goes into default of their lease, you can find yourself without an office having been evicted. On the other hand, if you do take care and build in safety clauses into your sublease agreement that is approved by the landlord, it can be a very good option.

So what are you looking for? An office for rent or the office for lease? In either case the professionals at OfficeFinder can help you find the right space at the best price without the usual hassle. Give us a try. There is no cost to you. It is a no lose proposition.

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By: James Osgood

Office Leasing Tips , Office Relocation , Office Rental , Sublease Office Space

Coworking Office Space User Costs

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Coworking office spaceAccording to a recent article in Gigaom.com coworking space costs less for a user than using a coffee shop if you take into account the cost of buying drinks and snacks.  According to the study quoted, the average monthly cost of using the facility by way of a flexible desk is only $152 / month. A 24 hr / 7 days per week plan would run around $207.00 / month and a permanent 24/7 desk would be $387.00 / month.

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Coworking office space , Flexible Workspace , Office Rental , Office Space Negotiations , Sublease Office Space

Profits and Pitfalls of Subleasing

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The article below is one that I wrote in February 1993.  I found it interesting that it still holds true not only for the Seattle are, but most office markets, too.

Almost 20 percent of the vacant office space in Bellevue and Seattle is available for sublease. Massive corporate restructuring, downsizing and mergers mean that many Puget Sound firms need less space than anticipated. Yet they find themselves locked into expensive long-term leases. It makes a lot of sense to find a way to recoup on space that would otherwise stand empty.

Even at 20 percent, sublease space in the market is underestimated. When any space is vacant or is soon to be available due to a pending move, it is included in our vacancy rate analysis. But often sublease opportunities are poorly marketed and publicized. Space with less than one year remaining in the lease is often not marketed at all. So tenants willing and able to relocate and go through the complications of a sublease transaction will find plenty of attractive possibilities around town.

"Attractive" is not a word you would hear from building owners, who often view subleases as bad news. Rates are typically at least 15 percent lower than direct leases. An owner therefore finds himself competing with existing tenants for new tenants. It's an uphill battle, because the landlord is usually at an economical disadvantage.

Rental rates for sublease space in some of the newest buildings in downtown Seattle, for example, can run as little as $12 per square foot, complete with full service. This is a whopping one-third savings over the average downtown rate of $18 for similar office facilities.

Garth Olsen of Cushman & Wakefield, leasing agent for the remaining 100,000 square feet of AT&T sublease space in the AT&T Gateway Tower downtown, says that his firm is asking between $14 and $15 per square foot. This includes a generous tenant improvement allowance with a lease that runs through the year 2000.

On the other hand, the landlord has a starting price of $18 per square foot. The building is only 54 percent full after two and a half years. Having to compete against your major tenants to lease space adds insult to injury.

Getting a Good Deal

Despite the obvious economic benefits, there are some challenges in negotiating a wise sublease. If costs were equal, it would be more desirable to deal directly with a landlord than to sublease, since there are fewer risks and complications involved. Direct lease space negotiations are two-way between landlord and tenant. In a sublease arrangement, however, transactions become three-way, with all the inherent pitfalls of any triangulated relationship. "In most leases, the original tenant is still ultimately liable for rental payments, even after the space has been subleased," said Craig Michalak, a prominent Eastside broker. "If the subtenant pays less than the face rate of the original lease, the original tenant must make up the difference." He points out that the subtenant, in turn, needs to be concerned with the financial stability of the original tenant. The subtenant may find themselves stuck making overage rental payments, or could end up with default problems that cannot easily be cures. In a worst-case scenario, they could be forced to move.

For companies like the Hogan Company, a Bellevue communications firm, subleasing 7,800 square feet of office space for the past three years has been a good decision. "I looked at everything available that was the right size for us," said Walter Hogan, president. "My final decision was based on cost. We were able to move into our space as is, and saved more than 20 percent over doing a direct deal. I'm very pleased with how everything worked out, and highly recommend a similar arrangement to others."

Hogan was lucky. It's unlikely that the layout and site of an office will exactly match a new tenant's needs, especially in offices greater than 5,000 square feet. When the space can't be used as is, an appropriate allowance for tenant improvements needs to be included in the sublease. Otherwise, the 'financial benefits of a reduced rental can quickly vanish. A typical downtown tenant improvement allowance is around $25 per square foot. Using a 10 percent annual interest rate over a five-year lease amortizes to $6.37 per square foot per year in rent. In other words, more than $6 of each rental payment goes to help the landlord payoff tenant improvements. When the remaining term is less than three years, these expenditures can cause the effective rental cost to increase significantly if the tenant has to foot the bill. What seemed at first glance to be a good deal becomes a very expensive proposition.

Remaining terms of less than two years are the norm for sublease space. But spaces offered by major users often have remaining terms and expansion options that reach well into the next century. In these cases, it's worthwhile to calculate very carefully the pros and cons of various tenant improvement options. Long-term subleases can make sense even when the subtenant ends up paying for improvements. When improvements are amortized over many years, the results of a sublease can become much more beneficial than anything that could have been obtained directly through the landlord.

Two of the larger companies in town with large amounts of sublease space available are AT&T, with 100,000 square feet, and Seattle First National Bank's Security Pacific Bank space, with 200,000 square feet. AT&T's space became available due to a reorganization of the company's work force. SeaFirst's space is the result of their well-publicized merger with Security Pacific Bank. Both leases have a long time to run...;, about seven and a half years for AT&T, and about 25 years for the bank. In SeaFirst's case, there is little probability of finding firms willing to commit for a quarter of a century. So they can be expected to be flexible on the length of term for subleases.
SeaFirst is in the process of finalizing their leasing strategy and selecting a leasing representative. They have already done well, subleasing 150,000 square feet of their original 350,000 square feet to West One Bank and other smaller subtenants. SeaFirst views their property more as owned than as leased. They have therefore decided not to disrupt the market by undercutting prices for competitive space. In other words, they are taking a long-term ownership approach, rather than opting for a quick fix that could result in both hard feelings and financial drawbacks in the long run.

Outstanding opportunities await any business owner willing to consider subleasing space. But risks are certainly present too. Anyone interested in investigating subleased property would be wise to consult a real estate professional as well as an attorney; to make sure that the deal is really as good as it looks.

Office Leasing Tips , Office Rental , Office Space , Office Space Negotiations , Sublease Office Space

Report: US Office Market Improving

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According to a recent report from Colliers International, it appears that the U.S. office space market has turned the corner and absorbed 6.5 million square feet of office space during the third quarter of 2010 compared to only 1.8 million sq. ft. of absorption activity for the previous quarter.

It was the major office space markets that showed the largest office leasing absorption for the quarter. Among those, the Washington, DC office space market showed over 882,000 square feet of net absorption during the quarter, resulting in an office space vacancy rate of only 11.6%, the lowest in the nation. The Washington, DC office rental rate increased to $52.32 per square foot, an increase of $1.06 over the previous quarter. The rental rate and absorption gains are mostly due to the addition of new government jobs and a limited supply of new office space coming on line during the quarter.

Also of interest, during the 3rd quarter the amount of sublease office space nationally continued to decrease, to only 7.6%of total office space vacancy compared with 8.2% at the end of the 2nd quarter.

The national office space vacancy rate decreased slightly from 16.3%to 16.2% during the third quarter, but it still is above the 16% at the end of the 3rd quarter 2009.

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Lease Negotiations , Office Space , Office Vacancy Rate , Sublease Office Space , Washington DC Office Space