Subleasing Office Space: Strategic Opportunity or Risky Shortcut?

In today’s dynamic corporate real estate environment, subleasing has emerged as a potential solution for companies seeking short-term flexibility and cost savings. With many organizations reevaluating their long-term space commitments due to hybrid work models, mergers and acquisitions (M&A) activity, or downsizing, the volume of sublease space on the market has increased significantly in recent years.

At Site Selection Group, we exclusively advise occupiers on how to evaluate all space options strategically—including subleases. While subleasing can present valuable opportunities, it also comes with inherent risks that require careful consideration and professional guidance.

What is a Sublease?

A sublease occurs when a tenant leases space to a third party rather than relinquishing the space to the landlord. In this arrangement, the subtenant pays rent to the original tenant (the sublandlord), not directly to the property owner. Subleases are typically marketed when the original tenant has excess space or is exiting the space before their lease ends. Despite vacating, the tenant remains liable for rent and other lease obligations, creating a strong financial incentive to find a subtenant.

Advantages of Subleasing

1. Cost Savings

Sublease rents are typically discounted compared to direct lease rates. The existing tenant is often motivated to recover a portion of their lease liability, especially in soft market conditions. According to CBRE’s Q2 2025 U.S. Office Market Outlook, sublease space is being offered at a 20–30% discount on average in most major markets.

2. Fully Furnished and Move-In Ready

Many subleases include existing office furniture, cabling, and other infrastructure—either as part of the deal or at a significant discount. This can reduce capital expenditures and speed up the move-in timeline.

3. Shorter Lease Terms

For companies needing flexibility, subleases can offer shorter commitment periods than direct leases, aligning better with uncertain growth projections or temporary operational needs.

4. Simplified Lease Structures

Subleases are often structured as gross or modified gross leases, allowing for predictable, fixed monthly payments without variable operating expenses or real estate tax escalations.

Risks and Limitations of Subleasing

Despite the potential advantages, subleasing can have notable drawbacks. A number of commonly overlooked risks can undermine the value proposition if not proactively managed.

1. As-Is Condition and Limited Improvements

Sublease spaces are generally offered “as-is,” meaning the subtenant assumes the space in its current condition with little or no tenant improvement allowance. Any modifications to fit the subtenant’s operational needs—such as reconfigurations, technology upgrades or cosmetic changes—will typically be at the subtenant’s sole expense. In many cases, these costs can diminish the rent savings that initially made the sublease attractive.

2. Landlord Approval is Not Guaranteed

Landlords must approve any sublease transaction, and they often retain the right to reject or recapture the space instead. This clause gives landlords the ability to take back the premises and lease it directly to another party—effectively killing your deal. This recapture right is common in commercial leases and can be exercised without explanation.

3. Approval Delays Can Disrupt Occupancy Timelines

Even when the landlord supports the sublease, the approval process can take weeks or even months, especially if legal teams or lease modifications are involved. Companies with urgent move-in dates or buildout schedules may find subleasing too slow to meet operational deadlines.

4. Credit Risk of the Sublandlord Could Impact the Subtenant

Unlike direct leases, subleases add another party into the risk equation. The creditworthiness of the sublandlord (the original tenant) is a critical consideration. If they default on the master lease, the subtenant could lose occupancy rights—even if they’ve paid rent consistently. Subtenants should conduct due diligence to understand the financial stability and motivations of the sublandlord.

5. Shorter and Inflexible Terms

Sublease terms are fixed by the remaining duration of the master lease. That can create a mismatch between business needs and lease expiration, particularly if the company needs a long-term solution. Extending the term typically requires direct negotiation with the landlord, who may prefer to start fresh with a new lease agreement, thereby eliminating any sublease discounts.

6. Fewer Tenant Rights

Subtenants rarely inherit the rights granted to the original tenant, such as renewal, termination, expansion, or rights of first refusal. These limitations can hinder long-term planning and reduce your leverage in future lease negotiations.

When Does Subleasing Make Strategic Sense?

Subleasing can be a smart option for companies with the following characteristics:

• Short-term or transitional space needs (e.g., startups, project teams, M&A transition space)
• Strong internal ability to customize or accept existing layouts
• A need to reduce upfront costs, including furniture and infrastructure
• Flexibility to assume risk associated with limited-term and landlord approval timelines

However, for companies seeking long-term stability, highly customized layouts, or time-sensitive occupancy, a direct lease may offer more control and fewer risks.

Final Thoughts: Proceed with Eyes Wide Open

Subleases offer meaningful cost advantages in the right circumstances—but these deals are not turnkey solutions. As with any real estate decision, companies must carefully evaluate the full financial and operational implications.

At Site Selection Group, our tenant advisory experts work exclusively with occupiers to navigate these complexities. Whether subleasing or pursuing a direct lease, our goal is to align your real estate strategy with your long-term business objectives—delivering value, flexibility, and operational efficiency.

If you’re considering a sublease, we can help you:

• Evaluate market options and identify qualified sublease opportunities
• Analyze total occupancy costs, including modification expenses
• Negotiate favorable terms and avoid hidden risks
• Navigate landlord approval processes to protect your timeline

Contact Site Selection Group to discuss how we can support your next real estate decision with data-driven insight and objective advice.