Office Space Subleasing: When Extra Space Becomes an Opportunity

01 / THE GUIDE

First, understand what you are actually renting

An office sublease involves three parties: the property owner or landlord, the existing tenant, and the incoming tenant.

The existing tenant rents all or part of its leased premises to another business. It becomes the sublessor, while the incoming business becomes the subtenant.

There are therefore two connected agreements: the original lease, often called the head lease, and the sublease. The original landlord–tenant relationship continues; it is not replaced simply because another business moves in. ^[2]

For example, imagine a company leasing a 400-square-metre office but using only 250 square metres. It might propose subleasing a clearly defined 150-square-metre section to another company, with agreed access to the entrance, pantry, and meeting rooms.

Alternatively, a company moving to a larger headquarters might seek a subtenant for its entire existing office.

Before comparing prices, ask: What exactly is being offered—a defined office, shared premises, or a package of workstations and services?

Then examine the agreement behind the label.

02 / THE GUIDE

When subleasing can make business sense

For businesses with more space than they need

Subleasing deserves consideration when a company’s space requirements have changed but its lease continues. Perhaps hiring plans shifted, operations were consolidated, or the company outgrew the premises and needs to relocate before the existing commitment ends.

It can be a way to recover costs while retaining the original lease—but it does not guarantee full recovery. ^[4]

The useful question is: “What is the best use of this space for the remainder of our commitment?”

That might be a sublease. It might also be retaining space for a credible expansion plan, negotiating with the landlord, or finding a replacement tenant under a different arrangement.

For businesses looking for their next office

An existing fit-out can be valuable when its layout, furniture, meeting rooms, and infrastructure suit the incoming business. It may reduce the work and spending needed before operations begin. Philippine brokerage guidance identifies fitted premises and shared facilities among the potential advantages of subleasing. ^[5]

Consider these possible situations: a project team needs a base for a defined period. A growing company wants to test a Cebu operation before committing to a larger office. A business needs additional capacity while its long-term premises are being prepared.

In each case, ask whether the sublease fits the actual business plan.

A shorter commitment is useful only when it gives you enough time to accomplish what you are moving there to do.

03 / THE GUIDE

Start with the lease—not the listing

Philippine law makes an important distinction.

This means neither of these blanket statements is reliable:

“Every sublease automatically requires the owner’s consent under Philippine law.”

“The tenant can always sublease because it is already renting the property.”

The actual agreement matters.

Ask a Philippine lawyer to review the signed head lease, amendments, and proposed sublease together. Identify restrictions on subletting, sharing occupation, permitted activities, alterations, signage, and operating arrangements.

Where consent is required, obtain it in the form the lease requires. Even where the lease is silent, seeking express written landlord acknowledgment is a sensible risk-management step.

For a partial-office arrangement, ask the building manager to review the proposed division and shared access before either party treats the space as ready for occupation.

An attractive advertisement is a starting point. It is not proof that the proposed arrangement has been cleared.

04 / THE GUIDE

For incoming tenants: protect your right to stay

One of the most important risks is easy to overlook:

You can pay your subrent faithfully and still face a problem arising from the original tenant’s lease.

The Philippine Supreme Court has recognized that a subtenant generally cannot claim possession rights superior to those of its sublessor. If the original tenant’s right to occupy validly ends, the subtenant’s position can be affected. The legal effect of a disputed termination, however, is not settled merely by someone announcing that the lease is cancelled. ^[3]

A useful way to evaluate an opportunity is to examine three timelines.

05 / THE GUIDE

“Fitted” is not the same as “ready for your business”

An office can look complete and still leave important questions unanswered.

During the inspection, work through an ordinary day in your operation—from the first employee arriving to the last person leaving.

Start with people and usable space. How many employees will be present at the same time? Where will confidential calls happen? Is there enough meeting-room capacity? Does the quoted area include shared facilities, or is it entirely exclusive to your company?

Test the operating arrangements. Ask which hours you may access the premises, which hours air-conditioning is available, and what after-hours use costs. Request specifics about backup power, internet installation or transfer, visitor access, and responsibility for service interruptions.

Examine what will actually remain. Agree on a written inventory of furniture, equipment, and fixtures, together with their condition and the right to use them. JLL’s subleasing guidance emphasizes defining the premises, adaptation responsibilities, and included assets rather than assuming that everything seen during a viewing comes with the deal. ^[7]

For shared premises, add a practical question: Can these two businesses operate comfortably beside each other?

Test meeting-room bookings, visitor circulation, noise, deliveries, cleaning, storage, and access to sensitive areas. Ask your information-technology team to assess network and equipment separation.

06 / THE GUIDE

Compare the full cost—not just the rate per square metre

A low rent quotation is useful information. It is not the entire decision.

For your comparison, request a written breakdown of recurring charges, initial spending, and exit obligations. Use the same occupancy period for every option.

An illustrative comparison

Suppose a business is comparing two 150-square-metre offices over 24 months, with both arrangements assumed to provide the required occupancy period.

These figures are invented for explanation. They are not Cebu market quotations or a claim about typical sublease discounts.

This simplified model excludes taxes, variable utilities, financing costs, deposits, escalations, restoration, and relocation. A real comparison must address those items.

The headline rent saving is ₱30,000 a month. After the assumed fixed charges, the recurring saving is only ₱10,000 a month.

But change the assumptions and the conclusion can change. Compare an already-fitted direct lease as well. Add the cost of adapting an unsuitable layout. Test the effect of a shorter secure term or another relocation.

Separate cost from cash required

For budgeting, keep refundable deposits separate from ordinary spending, while still including them in the cash required to move in. Assess who holds the deposit, what deductions are allowed, and when repayment is due.

Also avoid counting advance rent twice: once as an upfront payment and again in the same months’ recurring rent.

Settle tax documentation before signing

Ask your accountant to confirm the applicable tax treatment, rental withholding, invoice requirements, and any documentary stamp tax obligations. Clarify whether quotations include or exclude applicable taxes and how shared charges will be documented.

BIR’s Revenue Memorandum Circular No. 5-2025 addresses rental withholding and invoice-based substantiation, including VAT invoices. Tax documentation belongs in the transaction review—not in a hurried discussion after payment. ^[9]

07 / THE GUIDE

For existing tenants: calculate recovery, not just rental income

When you are offering space, begin with a realistic objective:

How much can this arrangement contribute toward the obligations we already have—after its additional costs?

CBRE identifies downtime, incentives, modifications, brokerage costs, and lease restrictions among the considerations that affect sublease economics. It also cautions that subleasing may not recover the full original cost. ^[4]

Budget for the time it takes

Consider another simple illustration. Your remaining lease term is 18 months, and the proposed subrent is ₱80,000 per month. If finding a subtenant and completing handover takes three months, your potential rental collection is:

Now deduct any agreed incentives, separation works, professional fees, additional services, and other costs you must bear.

That gives you a more useful estimate of contribution toward your existing obligations—not proof of profit.

Make the offer easy to evaluate

Prepare a clear information pack: the proposed area and floor plan, remaining term, approval position, intended handover date, included assets, operating restrictions, and a transparent charge breakdown.

Choose the asking terms by testing the alternatives available to an incoming business. Your historical expenditure is relevant to your own finances, but it is not, by itself, a reason for another company to pay more.

Choose the business, not just the offer

Ask for evidence of the prospective subtenant’s identity, signing authority, financial capacity, and intended use. Discuss working hours, visitors, confidentiality, and shared facilities before concentrating on price.

Remember that subleasing does not remove your responsibility to the original landlord. ^[1]

Finally, compare alternatives. Ask the landlord whether a partial surrender, replacement direct lease, assignment, or negotiated exit would achieve a cleaner result. If release from liability is the goal, make that a specific legal-review item—not an assumption.

08 / THE GUIDE

Negotiate the whole arrangement

Rent deserves attention. So do the provisions that determine whether the working relationship will succeed.

Use the following as discussion prompts for the parties and their advisers.

One useful negotiating exercise is to ask both sides: “What happens if our plans change, the other company has financial difficulty, or we disagree about a bill?”

The purpose is not to anticipate every possible argument. It is to resolve foreseeable issues while everyone is still cooperative.

09 / THE GUIDE

Follow a clear path from inspection to handover

Our suggested sequence is straightforward:

1. Define the business requirement
2. Inspect and compare
3. Verify the documents and approvals
4. Agree the commercial terms
5. Complete legal and tax review
6. Sign and satisfy the agreed conditions
7. Document handover

Keep the order deliberate.

Before paying a reservation amount, ask for written terms explaining who receives it, what it secures, and what happens if a required approval is refused or material information proves incorrect.

At handover, record the agreed inventory, existing defects, meter readings where relevant, keys, access credentials, and unfinished work.

A good opportunity should become clearer as you investigate it.

10 / THE GUIDE

What does a genuinely good sublease look like?

We would evaluate it through five questions:

1. Does the arrangement have a sound legal foundation?
2. Does the space work for the actual business?
3. Does the documented occupancy period match the business plan?
4. Does the complete financial comparison justify the move?
5. Are both parties capable of delivering what they promise?

These questions matter for both sides.

For the incoming business, a discount should not compensate for an arrangement it cannot safely rely on.

For the existing tenant, an attractive rent offer should not outweigh a poor operating fit or an unreliable counterparty.

The best deal is not necessarily the lowest number on the listing. It is the arrangement that remains sensible after the documents, costs, operations, and risks are understood.