Considering sub-leasing space in your office? Read this.

sub-leasing-office-space

Complex: Power and light meters will need to be separated. Photo: bikeriderlondon via shutterstock.com

1. Check the legality
The first thing to consider is whether or not you are legally entitled to sub-lease space in your office. Most commercial leases contain clauses which relate to sub-leasing. Get your company lawyer to check the terms of your lease to make sure you are allowed to sub-lease. A formal sub-lease will then be required to be prepared by your lawyer for signing by the sub-lessee. Never, ever assume you have an automatic right to sub-lease or that the Landlord either “won’t mind” or “won’t find out”. This would be a major mistake and may cost you a lot of money to correct.

 

2. Check the financial viability.
To check whether sub-leasing the surplus office space is financially worthwhile, apply the following simple arithmetical equation:
Total rental income from sub-lease minus sub-division legal and building costs equals net gain/loss.
The rental income you can easily work out. The legal costs can be based on the cost of your own original lease. The more difficult part of the equation is to calculate the building costs. There is no standard cost as each sub-lease will be different. Different buildings, different floor areas, different complexities, etc., etc. However, as a quick approximate guide to the building costs apply a rate of $250 /m2 to the floor area of the sub-lease. Input this data into the equation and you will quickly be able to work out the financial viability of the sub-lease. You can then decide whether or not to move onto the design stage.

 

3. Prepare a professional interior design.
Lots of things to think about here and lots of technical issues to be resolved. It is not simply a case of partitioning off the office space you want to sub-lease. You have to consider entrances and exits, security, access to shared amenities such as bathrooms and kitchen, acoustics, compliance with Council and National Construction Code regulations, etc. Call in an expert commercial interior designer or design and build fitout company to prepare the sub-lease space plan and building cost quotation.

 

4. Cover all the physical issues of creating the sub-lease space.
Office buildings host a whole range of sophisticated systems which all need to be modified if you create a new sub-lease space. As mentioned before, it is a much more complex project than just building some office partitions to sub divide the space
The real complexities come in altering the building’s services. Power and lighting will have to be physically separated and new metering installed. Air conditioning will have to be reconfigured and re-calibrated and the fire services (sprinklers, exit, emergency lights, etc.) will also have to be rearranged. Many newer buildings have computerised building monitoring systems which will also have to be modified. Once again this is the job on for an expert fitout company. Finally, don’t forget Council development consent will be required before any works can proceed.

 

5. Plan for the future
Sub-leasing office space which is surplus to current requirements is always a great cost saving idea. However in business things can change pretty quickly. New customers can be won and additional staff and space are suddenly required. Think about these things when considering how long the sub-lease term should be. Shorter terms generally command lower rents but give you more flexibility which may be useful to support changing business conditions.

 

The articles on the Charter Build blog are written by the CB team and edited by Jane Bright, our Design Director. If you have any questions regarding our content, syndication of our content or content submissions, please contact Jane via email jane@charterbuild.com.au. For notification on new blog posts either subscribe (top of sidebar on this page) or follow Charter Build @charterbuild and Jane Bright @1JaneBright.