Sublet or sit tight: the empty-desk problem

Leah runs a 30-person software consultancy that signed a seven-year office lease before her team settled into a hybrid routine. Three years in, her floor is busy on Tuesdays and Wednesdays and close to empty the rest of the week. Roughly a third of the 6,000 square feet she rents has not been used regularly in a year. Every month, she looks at the rent invoice and wonders whether someone else could be paying for the corner she never visits.

Leah is a composite, but her situation is common among small and mid-sized office tenants. The instinct is to sublet the surplus. Sometimes that is the right call. Often the lease, the market and the hidden costs make sitting tight, or negotiating with the landlord, the better option. Here is how to think it through.

First, what does your lease actually allow?

Almost every commercial lease restricts subletting and assignment. The two are different. In an assignment, you transfer the whole lease to a new tenant. In a sublease, you stay the tenant and rent part or all of your space to a subtenant, who pays you. Most leases require the landlord’s written consent for either, and many say consent cannot be “unreasonably withheld,” which sounds generous but still leaves the landlord room to say no for legitimate reasons, such as a subtenant with weak finances or a use that conflicts with other tenants.

Look for three clauses in particular. A recapture clause may let the landlord, on receiving your request, take back the space instead of approving the sublease. A profit-sharing clause may entitle the landlord to some or all of any rent you collect above what you pay. And a consent-cost clause may require you to cover the landlord’s legal and administrative fees for reviewing the request, whether or not it is approved.

Running the numbers honestly

The spreadsheet is where optimism tends to creep in. Here is an illustrative version of Leah’s. Her gross occupancy cost — net rent plus additional rent — is $40 per square foot a year. The 2,000 square feet she wants to sublet costs her $80,000 a year, and there are four years left on the lease.

Sublease space in many markets rents at a discount to direct space from the landlord, because subtenants get a shorter term, less control and often whatever furniture is left behind. Say she can achieve $30 per square foot gross, which would be $60,000 a year. Then subtract the costs. Separating the space may need a demising wall, a separate entrance or access control changes: assume $40,000. A broker’s commission on the sublease: perhaps $10,000 to $15,000. Legal fees for her and the landlord’s consent costs: a few thousand dollars more. Allow three to six months to find a subtenant, during which she still pays the full rent.

On those illustrative numbers, Leah recovers a meaningful share of her surplus cost over four years, but nowhere near all of it, and only if a subtenant appears reasonably quickly and keeps paying. If the market is soft, or the space is awkward to separate, the arithmetic can get thin very fast.

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A sublease turns you into a small landlord, with a small landlord’s risks, and without the building.

The case for sitting tight

There are good reasons not to sublet. If your headcount could grow again, giving away space on a long sublease can leave you scrambling for room. If the surplus space is in the middle of your floor rather than at one end, separating it may be impractical or expensive. If you would be sharing kitchens, washrooms or reception with a stranger, you should weigh what that does to your own team’s experience and to client confidentiality.

And the empty desks may be doing more work than they appear to. Space for a team day, an all-hands meeting or a big client project can be worth paying for, particularly in industries where in-person collaboration still matters to how the work gets done. Start by measuring use properly, with booking data or a few weeks of headcounts, before deciding the space is surplus.

The third option: talk to the landlord

Many tenants overlook the simplest route: asking the landlord to take the space back or restructure the lease. A landlord might agree to a partial surrender, in which you give back part of the premises in exchange for a reduced rent, sometimes with a fee. A landlord with another tenant looking to expand in the building may be glad to have the space. Another approach is a blend-and-extend, where you agree to a longer term in exchange for lower rent now or a smaller footprint.

Whether any of this is possible depends on the landlord, the building’s vacancy and how much time is left on your lease. A tenant-rep broker can test the waters without committing you, and a lawyer should document anything you agree to.

How Leah decided

Leah’s broker found that her landlord had a growing tenant on the floor above who wanted extra space. Rather than sublet, she negotiated a partial surrender of 1,500 square feet at the far end of her floor, paid a modest fee, and kept the remaining space with its meeting rooms. Her rent dropped, her liability for the surrendered space ended, and she did not become anyone’s landlord. It will not work out that neatly for everyone. But it is worth asking the question before you start writing a sublet listing.