Should you consider subletting retail space for rent?

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Are you having difficulty securing retail space for rent on The Upper East Side? Or perhaps you're launching a new business and want to rent a smaller area before locking into a big commercial lease (that might be out of budget) before you grow. 

For many, the option of subletting can seem like the perfect solution. However, there are a few things that future sublessees should be aware of before signing on to this arrangement. 

Please read this guide to help decide if subletting is suitable for your business, plus a foolproof way to secure the perfect commercial space in NY for your business without headaches!

What is commercial subletting?

Commercial subletting is a common practice in NYC. A sublease is an agreement between a tenant who already has a lease to the commercial property (sublessor) and another party who wishes to lease part of the property (sublessee). 

Sublessors may sublease the space to save, share costs, or fill unused space in the building. In addition, a sublessee may enter the agreement to save costs similarly or use a smaller space. Wide-angle aerial view over Yorkville and Upper East Side

What to consider when subletting space in NYC 

While subletting may seem attractive at first glance, knowing the potential restrictions can help you avoid costly and drawn-out legal issues down the road. Take a look at the following drawbacks when subletting in NYC. 

You lose a lot of control 

By subleasing space, you are accepting that you will have little control over the area, the terms, or access to any legal recourse should something go wrong. You're bound by the terms of the original lease contract, which means you agree to points you had no say over or had any part in negotiating.   

For example, you may not be permitted to make any changes to the space, such as what is generally allowed under a tenant improvement allowance

It's still a long process 

The steps to assigning a commercial sublet can still be lengthy, and you might have to make too many sacrifices to get into the space, plus build-out, preparation, etc. 

In addition, there's the transfer to a third party, plus you will need to review or have a lawyer review all the original contract documentation. 

You're liable to two separate parties 

In addition to dealing with the property's landlord, you're also dealing with the people leasing the space directly from the landlord. This means you are subject to extra tight and often restrictive conditions. In addition, you may be affected by issues between the principal property owner and principal lessees, such as internal matters and disagreements that could impact your business even if you're not involved. 

You could limit your potential growth 

At the forefront of every small business plan is growthAlthough nobody knows what the future holds, you may limit your business growth by opting for a space that turns out to be too small and does not fit your business's projected or unexpected growth requirements. 

When you calculate square feet necessary for your business, it may be helpful to model future growth into the equation to ensure additional capacity if required. Finding the ideal square footage for your business is essential!

So, what's the verdict on subletting?

Subletting is a viable option to launch your small or new business off the ground in the Upper East Side or any other area of NY with fewer costs. However, business owners should consider the above points before signing a sublease with the principal tenant. 

Some additional points to consider include: 

  • Ensure the building allows subletting before moving in—some business owners may be desperate or in financial trouble and sublet without consent from the property owner. 
  • Understand the motivation behind the principal lessor's decision to sublet—does everything seem above board, or are there undisclosed issues behind the decision?
  • If you decide to sublet a space, document all damages and instances of scratches with photography and dates immediately, so you're not left paying costs for a previous occupant 
  • Make sure costs such as utilities and communal expenses are agreed upon, and a transparent system is in place for how they are paid. Get this in writing.
  • Remember that a sublease is usually for a shorter time than a standard lease agreement.  

If a subleasing situation doesn't feel like it's in the best interest of your business's success, don't settle for that kind of retail space for rent. Coffee shop worker smiling to camera, standing at the counter

Why you should partner with professional commercial brokers 

If you're still apprehensive about subletting a space or after some experienced insight, reach out to the team at Verada. Our professional brokers and property specialists help business owners explore every option and partner with landlords to find the perfect space for their needs. 

Do your research before subletting space on the Upper East Side

While subletting may sound like an attractive option for new and smaller businesses looking to get off the ground, it's crucial to be aware of such an agreement's potential drawbacks and restrictions. 

Follow the steps above and reach out to the team at Verada to gain professional advice on whether subletting is the right decision for you. 

Learn more about finding the best retail space! Download our free resource, the "Guide to Choosing Your Next Retail Space."