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Is subleasing the future of rentals?

By Greg Bell

Ask any investor, and they will tell you that the past two years have brought some record-breaking returns. This is especially true for the rental market, which has seen extremely low vacancy rates. This has also resulted in an increase in subleasing because spaces are in such high demand. Let's take a closer look at why subleasing is increasing in popularity.

Why sublease?

There are many reasons why subleasing could be an attractive option for investors. One of the main reasons that landlords often allow for subleasing is that it offers more stability. Instead of having to search for a new tenant and or an additional one, the sublease option can ensure that you will be getting the rent in on time.

In addition, the sublease option gives you as the investor the chance to maximise the use of the structures that you are renting. Instead of an area being left vacant, this choice can help you bring in more money and get a higher return on your investment. During times of economic struggle, subleasing could be a good choice to offer you more flexibility, stability and income.

Potential disadvantages

While all of these pros sound promising, there are a few things that you should consider and keep in mind as an investor and landlord. When you allow a tenant to sublease a property, you have less control over the rented property. The subtenant will have obligations to their sublease and their connection to you as the landlord is more tangential.

Along the same lines, landlords must be able to trust their primary tenants to ensure that the subtenant is following the terms of the lease. From rental price, pet options and other requirements, the tenant should be reliable and responsible.

A rollercoaster market

The market is hot for rentals in both living and office spaces. This was not the case in the midst of the pandemic when office spaces were not being actively used due to lockdown restrictions.
For example, the availability of sublease space across the CBDs of Sydney, Melbourne, Perth, Brisbane and Adelaide declined by 9.4%.

So what has helped boost the sublease market in 2022? As lockdowns began to slow, business owners and consumers gained more confidence, which encouraged the sublease market to slowly but surely let up.

The current state of the sublease market

While the commercial rental market was struggling to find long-term renters, the sector may be bouncing back in some areas. On the Sunshine Coast, the market has been seeing a rise in home prices, similar to the rest of the country. The rental market in Queensland has also been growing and resulted in high yields and vacancy rates below 2.5%.

To learn more about how to read the current rental market through the sublease availability, reach out to a professional at Ray White Surfers Paradise today.

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