Sublease Rewards & Sublease Risks in 2020
About Sublease Rewards & Sublease Risks in 2020: The impact of the Covid 19 pandemic on the New York City office market is now being revealed. In our recent blog NYC Office Rental Report July 2020, Cogent Realty predicted that “Sublease office space availability will increase and be offered at a discount”. In recent weeks the volume of Subleases has indeed surged. Anecdotal evidence points to many of these Subleases originating in the TAMI (technology, advertising, media and internet) sector that had already been utilizing remote working. Additionally, some financial firms have listed their offices for Sublease after decentralizing operations and renting spaces in suburban areas. Surprisingly, a number of law firms have determined that their NYC office is superfluous because discussions with a client can be accomplished online with apps like Zoom. Critical “in person” meetings are occurring in private offices and conference rooms that are rented by the hour.
Office owners brace for competition – from their tenants
A Sublease can offer both rewards and risks to a Sub-Tenant (the company that leases and occupies the Subleased space). Subleases are offered by Sub-landlords (the holder of the master lease) to dispose of their surplus office space and mitigate financial obligations. This brief introduction is written for a Sub-tenant.
SUBLEASE REWARDS THAT MAY BENEFIT SUB-TENANTS
1. Rent is usually below the current market value.
2. Term length is often shorter than that which would be required by the building owner on a direct lease basis.
3. Office space is usually delivered pre-built and cosmetically finished. This eliminates the necessity of large capital outlays to renovate the space.
4. Potential inclusion of furniture, phones, network cabling, etc. This yields substantial savings.
5. Potential “turn key” move-in condition saves valuable time.
SUBLEASE RISKS THAT MAY INJURE SUB-TENANTS
1. As a Sub-tenant your lease contract is between you and the Sub-landlord. If the Sub-landlord defaults on its obligation to pay the rent to the building owner, a Sublease will usually terminate and the Sub-tenant is evicted.
2. As a Sub-tenant your Security Deposit is held by the Sub-landlord. In the event of financial difficulties or a default by the Sub-landlord, the Security Deposit can be lost.
Basic Strategies for Reducing Sublease Risks
1. Perform due diligence on the financial condition of the Sub-landlord and the outlook for its future business.
2. Your real estate attorney should have language added to the Landlord’s Consent (this is the document by which the Landlord gives its approval of the Sublease) that requires that the Sub-Tenant is notified of any default by the Sub-landlord and provided with an opportunity to cure (correct) the default.
3, Where a substantial risk is perceived, your real estate attorney should have language added to Sublease document that requires that your Security Deposit is held in escrow.
About Cogent Realty Advisors
Cogent Realty Advisors is an independent and licensed no fee Realtor with 20 years of experience representing businesses that lease NYC office space. Whether your business is looking for a Direct Lease from a Landlord or a discounted Sublease, our knowledge and experience will protect your interests and yield positive results. For information contact Mitch Waldman at (212) 509-4049.
#SubleaseRewards2020
The post Sublease Risks & Sublease Rewards in 2020 appeared first on Rent NY Office.
New York City Office Rental Report July 2020 is presented by Cogent Realty Advisors, Inc. 
The pandemic will result in a more favorable office market for Tenants that execute new leases and renewal leases.
The pandemic is having a profound effect on society, health and the economy of New York City. The long term impact on the NYC office rental market remains unknown in spite of countless predictions (often contradicting) from industry-related spokespersons including economists, building owners, brokers, architects, etc.
Office Space Price Guide for Buildings near Penn Station, 2020 provides useful information for any business that leases space.
450 SEVENTH AVENUE is located at the north west corner of 34th Street, about 100 feet from the entrance to Penn Station. It contains 520,000 RSF of Class B office space spread over 46 floors. It is well maintained and owner-occupied. 450 Seventh Avenue just completed renovations of its lobby, elevators, corridors and bathrooms. The building is primarily occupied by small- and mid-size firms including law, accounting, insurance and technology. The current vacancy rate is 3.3% and asking rents cost from $58.00- $62.00 PSF. The Landlord is able to custom-build your office quickly.
463 SEVENTH AVENUE is located at the north west corner of 35th Street, across from Macys. True to its fashion roots, this high quality building is home to a significant number of apparel companies. Other Tenants include offices for New York Presbyterian Hospital, management consulting and real estate investment. The building provides 24/7 access, a new lobby with uniform concierge, destination dispatch elevators, Tenant-controlled air conditioning, renovated corridors and rest rooms. Asking rents are priced from $49.00 to $55.00 PSF. On lease terms of five or more years the Landlord will custom build your office.
7 PENN PLAZA aka 370 Seventh Avenue, is a pristine owner-occupied and managed office building spanning the entire block front from 31st to 30th Street. This 18 floor building features windows on four sides, 24/7 access, a handsomely renovated concierge attended lobby and central HVAC. It is popular with small and mid-size firms such as legal services, accounting, architecture/engineering, software and financial advisors. Stores at the base of the building include Starbucks, the Juice Shop, Sweetgreen and coming soon- Sticky’s Finger Joint. Contemporary turn-key offices and build-to-suit spaces are available with asking rents from $70.00 PSF.
225 WEST 34TH STREET aka 14 Penn Plaza is located mid-way between Seventh and Eighth Avenue. This large Art Deco style building (1925) has an architecturally restored lobby coupled with modern building systems. Amenities include 24/7 access and an attended lobby, Tenant-controlled air conditioning, office cleaning and a choice of seven high-speed telecom providers. Currently it is 96% rented. Vacant spaces ranging in size from 996 to 8,430 RSF are now available for the lease. The cost of asking rents starts at $65.00 PSF.
505 EIGHTH AVENUE is located at the north west corner of 35th Street. This boutique loft building has 11,000 RSF floors which in some instances have been heavily divided for a diverse group of Tenants occupying offices as small as 500 RSF. Amenities include 24/7 access, an attended lobby during business hours and Tenant-controlled AC. Asking rents cost $48.00 PSF and the Landlord will build-to-suit.
237 WEST 35TH STREET is located between Seventh and Eighth Avenue and representative of many of the areas’ loft buildings. Previously rented to garment manufacturing operations, they are now occupied by service professionals (such as law, accounting and architecture) and TAMI (technology, advertising, media and internet) firms. Lower cost rent and an edgy environment are their biggest attraction. To varying degrees the lobby and infrastructure of these buildings has been renovated for “office users”. The office interiors typically have concrete floors, high open ceilings, large windows and quite often, window air conditioning units. At 237 West 35th Street asking rents are $40.00- $44.00 PSF. Additional loft charges include water, sprinkler and rubbish removal.