Sublease vs headlease: what business owners should know

In a headlease (direct lease), you contract with the building owner/landlord. In a sublease, you rent from another tenant who holds the headlease. The choice affects term, flexibility, and risk.

Headlease (direct with landlord)

You have a direct relationship with the owner. You can often negotiate term length, tenant improvements, and renewal options. Typical lease terms in Calgary are 3–5 years for smaller spaces and 5–10 for larger commitments.

Best for: Longer-term stability, custom fit-out, and when you want a clear relationship with the landlord and predictable renewal rights.

Sublease

The sublandlord (existing tenant) remains liable to the landlord. You get the right to use the space for a defined period, often shorter than a headlease (e.g. 1–3 years). Rent can be below the sublandlord's cost. Space is usually "as-is."

Risks to weigh: The sublandlord's lease with the landlord can end or be defaulted. If the headlease ends, your sublease typically ends too unless the landlord agrees to a direct lease with you. Always review the head lease (or a summary of key terms) and the sublease document.

Best for: Shorter commitments, testing a location, or securing space at a lower effective rent when the sublandlord is motivated.

Comparison at a glance

• Term: Headlease: often 3–10 years. Sublease: often 1–3 years.
• Rent: Headlease: set by landlord and market. Sublease: can be discounted.
• Flexibility: Headlease: renewal and expansion options are negotiable. Sublease: usually no guarantee beyond the sublease term.
• Risk: Headlease: you are the tenant of record. Sublease: you depend on the sublandlord's performance under the head lease.

Choose a headlease when you want stability and a direct landlord relationship. Consider a sublease when you need flexibility or a shorter term, but always understand the head lease and what happens if the sublandlord's lease ends or is in default.

Frequently Asked Questions

Is sublease rent always cheaper than a direct lease? Often, yes: a motivated sublandlord may price below their own cost to avoid paying for unused space, but not always. Compare the actual quoted rate, not just the assumption that subleasing is automatically cheaper.

What happens to my sublease if the sublandlord defaults on their headlease? Typically your sublease ends too, unless the landlord agrees to step in with a direct lease. This is the single biggest risk in subleasing and the main reason to review the head lease terms before signing.

Can I negotiate tenant improvements on a sublease? Rarely, sublease space is usually taken "as-is," since the sublandlord has limited incentive or ability to fund new buildout on space they're trying to exit.

How much shorter is a typical sublease term versus a headlease? Subleases often run 1–3 years versus 3–10 years for a headlease, which makes subleasing a reasonable option for testing a location or covering a short-term need.

Next Step

Understanding total occupancy cost matters just as much for a sublease as a headlease: see how Calgary office rent is structured, or reach out if you're evaluating a specific sublease opportunity.