If you have gotten past the initial phases of starting a business, like planning and securing financing, you will likely need to find a space to operate from. That’s an exciting step, but it can also be stressful in the modern real estate landscape because you have so many options. When you speak with your tenant representative about finding a company location, they might ask, “co-lease, sublease or direct lease,” in an effort to figure out what type of space you are looking for. So what’s the best option for you? The truth is that it depends on a number of factors. All of these options have positive components and drawbacks. If you are honest with your tenant representation team, they can help you choose the best space for your situation. Here are the pros and cons of the aforementioned types of leases.
Co-Lease A Property
Co-leasing is a big trend right now and it’s obvious why it’s the perfect option for some businesses. Sometimes referred to as Coworking spaces, these work environments are collaborative and open, a shared workplace where multiple companies, teams and even sole proprietorships work in the same space with radically different or similar neighbors. Unlike a traditional office space, where each company has a set lease and space, several tenants or teams co-lease a single space. This fosters a sense of community and it’s particularly favorable to tech companies, freelance workers, and fledgling startups. A co-lease situation differs from a sublease or a direct lease because it offers low start up costs, the opportunity to expose the company to favorable networking opportunities and the most flexible lease options out of the three leasing types. Often times, companies don’t even have a lease, which is why coworking space might be more accurate.
The advantages that a co-lease offers over a sublease or a direct lease are often diminutive over time. While initial costs are low, scaling your business becomes an expensive headache and the lack of personal space, privacy and confidentiality make this a less attractive option.
Sublease A Space
Are you not comfortable with the lack of privacy that comes from a co-lease, but not exactly ready to take on the financial burden of a direct lease? You could consider the sublease option, which affords you more freedom, space and agency than the co-lease option. A sublease occurs when a tenant has unused space that works for your operation, so you sublease from the original tenant with the landlord’s permission. If you’re growing as a company and need your own space, a sublease option is optimal because it gives you the opportunity to grow without locking into a long term lease. However, the security of the sublease is always subject to the responsibility of the leasing party, which means that if they default, you could lose your property. Furthermore, a viable sublease is harder to find than a co-lease or direct lease.
A direct lease is the most common lease type and it’s what many business owners use for their business. A direct lease is more optimal than a co-lease or a sublease for teams that are looking for a long term solution that gives them control of their workspace. If you’re company is growing at a reliable rate, a direct lease is likely going to be the best choice for your team. While you don’t make sacrifices in your control of a space, there are still some downsides to a direct lease, like the initial startup cost and the lack of flexible lease terms.
Determining The Best Option With LCI Realty
The truth is that there are probably a multitude of options that would be perfect for your company. That’s why a tenant representative can help you make the most optimal decision for your team, whether it’s a co-lease situation, a sublease or a direct lease.
Contact the LCI Realty team now for the best representation in the Phoenix metro area. Our team will help you to find a commercial property that has everything you need. Call 480-565-8981 to contact the LCI team now!