Commercial Master Lease & Subletting

2 Replies

Hi, 

Not sure of the correct terminology for this part of RE, so apologies in advance for clunky language.  I'm interested in learning about taking a lease for a space that I would in turn sublet for yoga/pilates/fitness classes, rehearsals, workshops, etc.  Thinking around 500 square feet.   Would do it in the New York area/Astoria, where I live.

Thanks,

Cheryl

This is a concept utilized in some form or fashion in a variety of commercial real estate areas. Third party logistics (3PLs) for example will lease warehouse space and then sublease and manage warehousing / distribution operations for end uses who do not want to take on the headache of managing real estate.

You have a couple options for finding space, first is "DIY". You could utilize free MLS services like loopnet and craigslist to search for commercial space as well as driving around looking for "For Lease" signs. Highly time intensive and you if/when you find space you will need to negotiate terms on your own without guidance on what would be considered a "market" rate and term etc. Second option is to find and hire a commercial broker, there was just a post recently about how to find the right commercial broker. I highly recommend you take a look.

Just a couple random thoughts to consider: Without seeing your business model I would say the space seems small, after the required bathrooms etc. your down to only a few hundred SF of space. Not much. Barely enough for one yoga class. A broker will be able to inform you more about space planning for your use.

Second: most (but not all) commercial leases are written in such a way that any subtenant must be approved by the landlord, but approval will not be reasonably withheld. One of the many reasons for required LL approval is so folks don't do exactly what your proposing which is to lease their property and then profit off a sublease. LL's want to squeeze every drop of profit out of their space, who wouldn't? On top of the LL approval there are often clauses stating that any profit earned in a sublease must be split 50/50 with the landlord and any attempt to strike the language is generally a red flag. 

This is not to say "bad idea", but rather that you make sure to let everybody involved (broker, attorneys, landlords etc) what your business model is so you dont waste your time touring and negotiating on space only to find the above road blocks during lease review.

Thanks for the intel/feedback, Taylor.  I will definitely read the article on choosing a commercial broker.

Re: feasibility of the model, it should be the same model (on a much smaller scale) as co-working spaces, etc., yes?  These are very popular in NY and i believe most of the companies lease the space and charge for space to members.  Is the membership aspect the workaround?

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