What to do with your excess office space?
Well there are a couple of things you can do!
Firstly take a critical look at your business model, have things changed, are there staff that work more regularly from an off-site location? Has your business changed and you have fewer employees that require a dedicated desk in the office? Is this trend going to continue for the foreseeable future? If this is the case then it may be prudent to look at either reducing your lettable space, or subletting some of your space. There are benefits to both of these options, and discuss with your landlord how they can assist you. Quite often your landlord will be able to assist with reducing your space, and leasing the balance to one of their other tenants in the building. This is often the better solution, as you no longer have to worry about finding the right tenant to sub-let the space. The downside is that, if you in the future require additional work space, it may not be available to you. So there is less flexibility in following this route.
The other option you have is to find a suitable tenant to sub-let the unused space for a specific duration. You need to do some homework and understand the process and additional costs involved in sub-letting your space.
1. Make sure that you have informed your landlord that you need to sub-let some of your space. This is usually not a problem for the landlord, but they may want to be involved in making sure that the prospective tenant fits in with their tenant profile for the building. They may also want to request additional security from the incoming tenant to cover any risk they are exposed to.
2. Get some professional help. Have look to see who are the top three Commercial Property agencies that work in your area or suburb. Make contact and set up time to interview the Property Brokers that will be assisting you. It’s usually quite easy to see who are the most active agencies in the area by doing a quick search on the internet. Ask some pertinent questions, like has the agent had any experience in sub-letting space. Does the agency have the resources to properly market your space and are they able to facilitate the leasing process all the way to a binding sub-let agreement. Ask your broker to furnish you with the standard sub-let agreement to make sure that you are happy and that that the agreement in more or less in line with your own lease agreement with the landlord.
3. Discuss with your top three property brokers what they think is a market related rental for the space, and come to an agreement on what rate you can market the space for. Beware of the one who promises you the highest rental. The market is extremely competitive right now and big landlords are offering great incentives to lure new tenants to their buildings. Also remember you cannot profit from a sub-rental agreement. Agree on a marketing program. Where will your property be marketed on the internet? Make sure you are happy to see your space on the shared marketing platforms such a Property 24, Private Property etc.
4. Discuss your plans with your staff and suppliers. Sub-letting space can be seen that your business may in some financial distress, so make sure that you communicate your intentions to both suppliers and staff.
5. Understand the costs involved in sub-letting your commercial space. Long term you will get a rental income, but be prepared for some upfront costs. Factor this in when making the determination if sub-letting is the right decision. You are responsible for the agents commission as well as costs related to drawing up a sub-let agreement and any legal reviews of the agreement.
6. Another factor to consider is making the space as enticing as possible to a new tenant. You may need to do some internal work to the space to make it suitable for an incoming tenant. This could include partitioning off the space, re-configuring the entrance to the space to ensure your sub-let has their own entrance to the space. You may have to look at other functions, such as does the new tenant have access to a kitchen? Do you need to put in a new kitchen for them? If the space is mostly open plan your potential tenant may want an office or two, or even a meeting room. Are you going to make a concession for them, do they need to carry the cost? Speak to your property professional to get the best advice to get a qualified tenant to sub-let your space. Make sure that you done hog all the parking. The new tenant will require adequate parking as well. This can be a deal breaker.
At Cape Space Properties, we are perfectly placed to assist you to sub-let your office space. We have years of experience and have helped 100’s of companies to find the right tenant to take some of their space. Not only that, we have the widest reach when it comes to marketing commercial property, both in Johannesburg and Cape Town. That’s not all, we have an inhouse design team that can assist with making the right changes to your space, to optimize your own work space as well as re-designing any excess space that you may want to sublet.
Speak to one of our experienced property professionals today to get the best advice on sub-letting your space