If your company has excess office space in Chicago or the suburbs, subleasing can help reduce the financial obligation remaining on your lease.
Successfully subleasing office space, however, involves more than finding another company willing to occupy it. You need to understand your existing lease, determine what the space is worth in today’s market, position it against competing direct and sublease space, find a qualified subtenant, negotiate the economics and obtain your landlord’s approval.
Tenant Advisors exclusively represents office tenants throughout the Chicago area. We help companies evaluate, market and negotiate office subleases with the goal of minimizing their remaining lease obligation.
How Does an Office Sublease Work?
In an office sublease, the original tenant—often called the sublandlord—leases some or all of its office space to another company for a portion of the remaining lease term.
The original lease with the building owner generally remains in place. That means the original tenant typically remains responsible for its lease obligations even after a subtenant moves into the space.
Because every lease is different, your lease and proposed sublease should be reviewed by a qualified real estate attorney.
1. Review Your Existing Office Lease
Before putting your Chicago office space on the sublease market, review the assignment and subletting provisions of your existing lease.
Important provisions may include:
- Landlord consent requirements
- Landlord recapture rights
- Notice requirements
- Restrictions on potential subtenants
- Requirements concerning the subtenant’s financial condition
- Sharing of sublease profits
- Legal or administrative fees
- Restrictions on advertising or marketing the space
Understanding these provisions before marketing the space can prevent problems later in the transaction.
2. Determine the Market Value of Your Office Space
One of the biggest mistakes a company can make is assuming its existing rental rate determines what the space is worth as a sublease.
It doesn’t.
Your space competes with other available subleases and with office space being offered directly by Chicago-area landlords.
Direct landlords may offer free rent, tenant improvement allowances, turnkey construction and other concessions. Those incentives affect the effective cost of competing space.
A realistic sublease asking rate should therefore be based on current market alternatives—not simply the rent you are currently paying.
3. Calculate Your Potential Sublease Recovery
The goal of a sublease strategy should generally be to minimize your company’s total remaining lease obligation.
Suppose your company is paying $30 per square foot and comparable sublease space is available for $22–$25 per square foot.
Holding out for $30 may sound attractive, but if doing so causes the space to remain vacant for another year, your company could ultimately recover substantially less money.
We recommend evaluating different combinations of:
- Asking rent
- Expected negotiated rent
- Vacancy period
- Free rent
- Brokerage commissions
- Legal expenses
- Furniture
- Improvements
- Other transaction costs
This allows the tenant to compare the total projected recovery under different scenarios.
4. Position the Office Space to Compete
Sublease tenants frequently want office space they can occupy quickly without spending significant money on construction.
That can make furnished, move-in-ready office space especially attractive.
Marketing materials should clearly identify:
- Building and location
- Available square footage
- Asking rental rate
- Availability date
- Remaining lease term
- Floor plan
- Furniture availability
- Parking
- Building amenities
- Conference rooms and private offices
- Recent improvements
- Transportation and highway access
Professional photographs and an accurate floor plan can make it considerably easier for prospective tenants and their brokers to evaluate the opportunity.
5. Market the Sublease to Chicago Tenants and Brokers
Simply posting office space online is rarely enough.
A successful sublease marketing campaign should expose the opportunity to companies actively searching for office space and to the commercial real estate brokers representing those companies.
Tenant Advisors markets sublease opportunities throughout the Chicago metropolitan area, including:
- Chicago CBD
- Loop and West Loop
- Fulton Market
- River North
- Schaumburg and Northwest Suburbs
- O’Hare and Rosemont
- Oak Brook and the East-West Corridor
- Naperville and Downers Grove
- Northbrook and Deerfield
- Skokie and the North Suburbs
Generating multiple prospects gives the existing tenant a better opportunity to improve the economics and timing of the sublease.
6. Negotiate the Sublease
Once an interested company is identified, the parties negotiate the principal business terms.
These commonly include:
- Rental rate
- Sublease commencement date
- Expiration date
- Free rent
- Security deposit
- Furniture
- Parking
- Operating expenses
- Utilities
- Improvements
- Signage
- Condition of the premises
The financial strength of the proposed subtenant is also important because the original tenant will generally remain responsible under its existing lease.
7. Obtain Landlord Approval
Most Chicago office leases require landlord approval before a sublease can be completed.
The landlord may request financial information about the proposed subtenant and other information required under the original lease.
The landlord may also have specific rights under the lease, including a right to recapture the premises under certain circumstances.
The lease should therefore be reviewed carefully before a sublease is marketed or submitted for approval.
8. Have an Attorney Prepare or Review the Documents
Once the business terms have been agreed upon and the landlord’s requirements have been satisfied, the transaction is documented.
This will typically involve a sublease agreement and landlord consent.
A qualified commercial real estate attorney should prepare or review the documents and confirm that the sublease is consistent with the requirements of the original lease.
Frequently Asked Questions About Chicago Office Subleases
How long does it take to sublease office space in Chicago?
There is no standard timeframe. Location, asking rent, size, condition, furniture, remaining lease term and overall market demand can significantly affect how quickly a space is subleased.
Pricing the space correctly from the beginning can be one of the most important factors affecting the marketing period.
Can my Chicago office landlord refuse to let me sublease?
It depends on the language in your lease. Many commercial office leases require the landlord’s prior written consent and specify the conditions under which that consent can be granted or withheld.
Review the assignment and subletting provisions of your lease before beginning the process.
Am I still responsible for my lease after I sublease my office?
Generally, yes.
Unless you negotiate a release or other arrangement with your landlord, the original tenant typically remains responsible for its obligations under the original lease.
That is one reason the financial strength of a proposed subtenant matters.
How much of my rent can I recover through a sublease?
It depends on current market conditions.
Your potential recovery is affected by your location, building, space condition, remaining term, existing rental obligation and competing direct and sublease space.
The relevant question isn’t simply what rent you can get. A better question is: what strategy gives my company the greatest total recovery over the remaining lease term?
Is furnished office space easier to sublease?
It can be.
Many companies considering sublease space are looking for a faster, lower-cost occupancy solution. Existing furniture, conference rooms, cabling and other improvements can reduce the cost and time required to move into the space.
Should I sublease my office or negotiate an early lease termination?
Both options should be evaluated.
Depending on your landlord, remaining lease term and current market conditions, alternatives can include subleasing the entire office, subleasing a portion of it, negotiating an early termination, giving space back to the landlord, downsizing within the existing building, relocating and subleasing the existing space, or remaining until lease expiration.
The best strategy depends on the economics of each alternative.
Who can help me sublease office space in Chicago?
A commercial real estate broker experienced in tenant representation can help determine market value, position the space, market it to prospective tenants and brokers, negotiate proposals and coordinate the transaction through landlord approval.
Tenant Advisors has exclusively represented Chicago-area office tenants since 2004. We do not represent landlords.
Our tenant-only model means our responsibility is to the office tenant we’re representing, not to the owner of the building.
Need to Sublease Office Space in Chicago?
Tenant Advisors helps companies throughout Chicago and the suburbs develop and execute office sublease strategies.
We can help you:
- Review the business terms of your existing lease
- Evaluate current competing space
- Determine a realistic asking rate
- Model your potential financial recovery
- Prepare and market the space
- Solicit prospective subtenants
- Negotiate sublease proposals
- Coordinate the process with your landlord and attorney
Tenant Advisors
Representing Chicago Office Tenants Since 2004. Never Landlords.
Call (847) 778-0296 to discuss your office sublease or request a confidential evaluation of your space.