Serial entrepreneurs are walking on Sunshine.

With their small Internet business struggling in the wake of the dot-corn bust, Joe Raby and Cheni Yerushalmi resorted to a little real estate contortionism to help them stay afloat.

The pair--who have been best friends since childhood and call themselves serial entrepreneurs--decided to exchange their tiny 200 s/f offices for a much larger 3,600 s/f sublease in a bet that they could divvy up the larger space among a few tenants and break even on rent. When the move was rewarded with voracious demand from interested tenants in need of space, the two quickly realized that they had stumbled on more than just a way to cut down on their overhead.

"We filled the space so quickly, we began to see that we were actually filling a niche in the office market for small businesses that no one else was really servicing," Raby said. "So we added a fax line and a T1 connection for everyone and the tenants loved it. It just took off."

The space was an instant hit among those who need temporary space, spaces smaller than what is commonly available on the market, or who want the leeway to easily expand or contract. Such are the typical requirements of small businesses and startup companies, Raby said, tenants for whom the barrier to entry into Manhattan in recent years has gone from difficult to nearly impossible as the city's booming office market continues to drive rents and occupancy rates to near record highs.

Based off of the strong demand, Raby and Yerushalmi have been able to expand the company, which they call Sunshine Suites because--as its tagline suggests--it attracts "every business under the sun."

"Here, let me tell you the tenants I pass as I walk through the space," Raby said from his cell phone, demonstrating casually how diverse his company's tenant roster is. "We have a hedge fund, a book publisher, a clothing manufacturer ... we have a guy who uses his space as his office for a club that he owns. I have an accountant who hires eight people during tax season then goes back down to three or four; our space allows him to grow for the months that he needs it and then shed the space again when he doesn't.

"A lot of these tenants would be too small to take an entire office for themselves, they would have to work at home. Our space allows them to take offices on a monthly basis. If their business recedes, they have no real financial commitment. It's very appealing for them."

From its original 3,600 s/f lease at 45 West 21st Street, Sunshine has continued to add space to its portfolio. It took another block of space at 45 West 21 st Street and leased more than 30,000 s/f at 419 Lafayette Street in NoHo.

Emboldened by its success so far, the company recently completed the largest single office deal it has ever signed, a 25,005 s/f net lease of 12-14 Debrosses Street. Mark Furst and Aron Schreier of Colliers ABR represented 12-14 Debrosses Street's landlord, Fratelli Branca Real Estate LLC, in the transaction. Jeffrey Nissani of JSN Properties repped Sunshine.

The building will be the first in which Sunshine is the sole occupant, a particularly attractive feature of the deal that Raby and Yerushalmi say will allow them to convert it into their flagship location.

When Raby and Yerushalmi started with the original 3,600 s/f at 45 West 21st Street, they divided it into two spaces, one for their own use and the other for the subtenants. They did work to partition that sublet space into separate offices and filled it with six different companies. But they quickly found that they had miscalculated their own need. Their small Internet company, which had relocated from a mere 200 s/f, filled little more than a lonely desk in their cavernous 1,800 s/f half of the space.

It only made sense to sublease more. But because the two were originally planning to keep their Internet business in the office, they decided that it would be easier to use an open layout rather than partition the space the way they did for their initial subtenants. What they wound up creating served as the concept for Sunshine's spaces thereafter, a single large office whose cubicles and workstations were filled with different tenants. The pair soon added amenities like photocopying and fax machines, Internet connections, and conference rooms that tenants could reserve for meetings.

Because they look identical to the space of far bigger tenants, the offices often have the effect of boosting the image of Sunshine's tenants--who might otherwise not have been able to operate within such a professional looking environment. And because the spaces are filled with so many different occupants, Raby said that tenants are able to network and generate business amongst one another, a practice that Sunshine encourages by organizing tenant parties and events.

"At the time when I had gone out on my own, it was an extremely cost effective way of starting up a company and keeping overheard really low," said Sunshine's broker, Nissani, who himself ran his fast growing brokerage business out of a Sunshine suite. "A major benefit was that the space creates an extremely social atmosphere among its tenants. Everyone seems to try and help each other business-wise."

12-14 Debrosses Street will allow the company to advance its temporary office concept a step further. Because they are receiving such a large block all at once, Raby and Yerushalmi say that they will be able to employ a more efficient office design.

In the past, when the pair would grow in buildings on a floor by floor basis, they would usually have to install conference rooms, kitchenettes, and mailboxes, over and over again to service each new space because, oftentimes, the spaces weren't contiguous and needed their own suite of amenities. Now such redundancies can be eliminated because tenants will have access to all of the building's three floors.

Yerushalmi, who says that he is more focused on the design aspects of the company's space while Raby concentrates on the business side, indicated that Sunshine will consolidate conference rooms on the building's base floors because tenants typically don't like to have street level offices. He said that the pair would also likely brand the building by installing Sunshine's logo on the outside facade.

"We want this location to be almost clubbish with a hotel look and feel," Yerushalmi said.

"Our market is very young, entrepreneurs in their 20s and 30s and 40s who want trendy looking space. We're going to have waterfalls in this space and a beautiful lobby area. We're really giving tenants a strong identity."