L.A. County’s office market is experiencing growing subleasing activity against a backdrop of persistent high vacancy rates and wary landlords

Michael Arnold, Executive Vice President, Founder Tenant Consulting Group at NAI Capital Commercial said, “There is an abundance of sublease space on the market. Landlords are having to compete with this “glut” of space currently in the market.”

Michael Arnold
Executive Vice President
Founder Tenant Consulting Group
NAI Capital Commercial

Michael addressed the question about tenants securing favorable deals through subleasing and offered guidance to potential sublessees. According to him, a significant number of tenants are currently opting for the ‘flight to quality’ trend. He emphasized that for sublessees, the key consideration should be the financial reliability of the sublessor. Michael advised against putting oneself in a precarious situation where the sublessor might lack the financial capacity to fulfill obligations. To address concerns, he recommended obtaining a recognition agreement from the landlord. This agreement would confirm that, in the event of a sublessor default, the landlord acknowledges and accepts direct payments from the sublessee. In an optimal scenario, Michael suggested initiating negotiations with the landlord to accept upfront direct payments from the sublessee and working out a termination agreement with the sublessor. This approach, he advises, would eliminate uncertainties and concerns for the sublessee, ensuring a smooth tenancy.