There is a substantial amount of uncertainty as to what the commercial office market will look like as we emerge from the COVID-19 crisis.<\/b><\/p>\n
Will companies continue to allow their employees to work from home and thereby reduce their overall footprint? Will office footprints increase to allow health officials\u2019 recommended social distancing within the office space? What will the impact of the economic downturn be on the demand for office space?<\/p>\n
While there are no fast and clear answers to any of these questions, one thing is for certain, the amount of sublet space on the market will increase significantly. It has been reported that companies will be putting over 8,000,000 ft. (source:_______) of sublease office space on the market.<\/p>\n
This could present opportunities for companies to sublease space on very favorable terms. However, before wading into the subleasing market, companies need to be aware of the potential pitfalls and challenges this may\u00a0 <\/span>present.<\/p>\n Below is a quick overview of terminology referenced throughout this document.<\/p>\n TERMINOLOGY<\/strong><\/p>\n RISK OF DEFAULT BY SUBLANDLORD\u00a0<\/strong><\/p>\n If the sublandlord defaults under the over-lease then the subtenant may be subject to eviction. Just as sublandlords will check the credit of the subtenant, the subtenant should also evaluate the financial strength of their sublandlord. The risk is particularly high if the sublandlord has low or marginal credit and is subleasing their entire space at a sublet rent lower than what they are paying under the over-lease.<\/p>\n There are number ways this can be addressed.<\/p>\n Analyze the risk:<\/p>\n The subtenant should try to obtain a non-disturbance agreement from the overlandlord. This is an agreement whereby the overlandlord agrees that it will not evict the subtenant in the event of a default by the sublandlord, so long as the subtenant complies with its sublease agreement. If the overlandlord evicts the sublandlord, the subtenant then becomes the tenant of and pays rent directly to the overlandlord. However, there is always the issue as to the rent the subtenant will pay to the overlandlord. Is it the rent stipulated in the sublease agreement or the rent specified in the over-lease? It is very important to review the terms of the non-disturbance agreement to understand what it provides. A subtenant may lose the benefit of its less expensive rent. The subtenant needs to negotiate the terms of the non-disturbance agreement. In a very soft rental market, the overlandlord may be willing to accept the lower rent rather than running the risk of having a vacancy in the building at a time when renting is difficult.<\/p>\n PROCESS<\/strong><\/p>\n There is a substantial amount of uncertainty as to what the commercial office market will look like as we emerge from the COVID-19 crisis. Will companies continue to allow their employees to work from home and thereby reduce their overall footprint? Will office footprints increase to allow health officials\u2019 recommended social distancing within the office space? What will the impact of the economic downturn be on the demand for office space? While there are no…<\/p>\n","protected":false},"author":203,"featured_media":14242,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,24],"tags":[],"class_list":["post-15147","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-insights"],"yoast_head":"\n\n
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