That dynamic can disappear when the landlord's competitor is a tenant with access to space in the same buildings the landlord seeks to fill. For a growing number of Austin landlords, the very tenants that pay rent are competing with the landlord for new tenants. The landlord only has about 3,000 square feet available in the project. Real estate firm herronwilliams LLC, on the other hand, is marketing more than 60,000 square feet in several subleases at Bridgepoint Plaza, and asking less rent. Sam Houston of Hill Partners Inc., who markets space for the landlord at Bridgepoint Plaza, says the advantage of the more expensive direct offering is flexibility to provide the size, finish and potentially longer term to better fit a company's needs.
Subleases also present unique risks tied to the viability of the tenant in the master lease.
If that tenant goes out of business, or otherwise defaults on the master lease, the subtenant may find itself on the street. If you're subleasing from Janus or Schwab, you don't have that risk. At the moment, sublease asking rates average about a dollar per square foot less than direct landlord deals, Hicks says. Considering the disadvantages and added risk of subleasing, landlords don't face a great challenge in competing with sublease asking rates so near their own. That could change, however, if tenants unable to find subtenants continue to lower their asking rates, particularly as the ever-shortening term on the master lease makes their space less and less desirable.