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Why Landlords Don’t Want to Lease to More Startups

Landlords are trying not to rent to startups 42Floors Blog


They’re fatigued with sub-sub-subleases.

Startups that do well may have to lease a space for 5 years, only to move out after only nine months because of their growth. To the startup this is fantastic news, but to the landlord it’s the beginning of an annoying sublease process as they are constantly spending money on their lawyers to approve each sublease.

Our last office was leased to MoPub, which then had the lease taken over by Twitter following their acquisition, who then subleased it to us. We then sub-subleased half the space to Big Commerce, who grew out of it in 6 months and sub-sub-subleased it to another company, which split with it with one other startup.

At one point, we needed to change something. It required coordination of 5 signatories of 5 different companies, each counseled by their own broker and lawyer.

Landlords believe the economic apocalypse is coming.

I’m actually stunned how similar landlord opinions are in this regard. This little insight has spread through the landlords and brokerage market with incredible consistency: Most economic cycles are 7 to 10 years long.  In 2018, it will have been 10 years since the last big economic dip. So simply by the law of averages, they’re planning their office terms assuming there will be some big downturn in 2018 and they don’t want to have startups that are dependent on future fundraising in their spaces when it hits.

Stashed in: San Francisco!, Awesome, Startup Offices, Hacker News!, Startup, San Francisco, Real Estate, Freakonomics, Property

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The landlords are being rational but that's not necessarily good for startups. 

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