Sublease space in the first quarter of 2021 accounted for more than 30% of inventory in places like Manhattan, Toronto, and Austin, Texas, while, in San Francisco, it reached an astonishing 50.4%, according to a recent report by Cushman & Wakefield. Yet despite the glut, some brokers have succeeded.
Consider These Four Ideas:
- Don’t overlook the obvious: other building occupants - Arthur Draznin, principal owner of Draznin Real Estate Advisors in New York City, emphasizes the importance of contacting every tenant in the building where the sublease space is located. “One never knows who may want to expand, and the best place for a tenant to expand is within its own building.”
- Define characteristics of suitable prospects - Arlon Brown, SIOR, senior vice president of Parsons Commercial Group in Southborough, Mass., narrows the list of potential sublessees by defining criteria of likely candidates. For example, he recently marketed a sublease space in a Class B building in downtown Boston. In his analysis, the space was most suitable for a nonprofit. Accordingly, his team obtained a good list of nonprofits in metropolitan Boston and contacted the president or CFO of each. The process saved time and energy.
- Offer special incentives - Bert Rosenblatt, cofounder of Vicus Partners in New York City, has observed more firms offering double commissions and $10,000 Amex gift cards. Charles Tatham, SIOR, CEO of Tatham Property Solutions in Paris, says his firm is paid out of the sitting tenant’s savings. Consequently, outside brokers don’t have to split their fee.
- Use technology, but don’t neglect traditional outreach - Draznin advocates online video tours, virtual reality headsets that enable prospective tenants to experience walkthroughs, and 3D visual models. Nevertheless, he says there’s no substitute for bringing brokers on in-person tours. Another low-tech option is the plain old phone call. A personal call is a great way to direct a prospect’s attention to his opportunity.
Creative marketing strategies can generate results only when sublessors and building owners have realistic expectations. Brown has seen many would-be sublessors put their space on the market at only 10% or 15% below what they’re paying. “As time creeps on, they get down to a year left on a lease. That’s when they cut the price to a fire sale. But very few people want a sublease for only a year.” Brokers should counsel their clients to ensure such situations don’t arise.
Sublessees and their brokers should act quickly while the market still favors tenants. With supply decreasing but still high, sublessees can enjoy significant space upgrades.
Editor’s note: This article was adapted from “Creative Strategies for Marketing Office Subleases,” published in the fall 2021 issue of SIOR Report.