- Sublease space this cycle will surpass the previous cycle’s peak by a wide margin. This has the potential to significantly affect the trajectory of vacancy and rent.
- Boston and San Francisco were early leaders in the rise of sublease space, other markets are catching up.
- Manhattan has seen 2.3 million SF of new sublease additions in July and August. Los Angeles’ sublease inventory has grown by 1.2 million SF.
- Houston saw six blocks of 50,000 SF + added in the third quarter-to-date, as part of a 1 million SF increase.
- Washington, D.C. has seen 900,000 SF of additions in Q3 2020 so far, Boston 560,000 SF.
- Sublease inventory in Chicago’s CBD is at levels not seen in over 10 years. Atlanta has added 763,000 SF in July and August.
- We expect sublease space to continue to rise for the next 6-12 months as tenants assess their space needs.
Sublease space is on the rise. Early movers in this space were Boston and San Francisco, but other markets are starting to see a surge in space as the third quarter has gone on. More will be added over the next 6-12 months as tenants assess their space needs.
The total amount of sublease space on the market is already approaching last cycle’s peak levels. Heading into the pandemic led recession, sublease supply was trending at higher levels than shortly before the Global Financial Crisis (GFC). With 14.5 million square feet of sublease space added to the market in the second quarter, an increase of 11.7% in one quarter alone, total sublease space available stood at 139.1 million square feet, just four million square feet short of the record set during Q2 2009.
This trend has picked up pace in Q3 2020 to date, suggesting that sublease volume in this cycle should surpass the previous peak by a fair margin. This has the potential to significantly affect the trajectory of vacancy and rents.
We caught up with our research leads across some of the biggest markets in the country and the refrain was the same – sublease space is on the rise. Greater D.C. has seen 900,000 SF of additions quarter-to-date. Houston, 1 million SF, including six blocks of 50,000 SF or greater. Chicago’s CBD has the highest level of sublease space in over 10 years. Seattle’s sublease market is driven by spaces in the 20,000-50,000 SF range. Manhattan saw 1 million SF of additions in July, and an additional 1.3 million SF in August. Sublet inventory accounts for 23% of Manhattan’s total availability. Los Angeles has seen 1.2 million SF added in July and August, while Boston saw an additional 560,000 SF. Atlanta has added 763,000 SF, including a 108,000 SF block put on the market by Macy’s. Twitter is adding 105,000 SF of sublease space to the market in San Francisco. AT&T added 336,000 SF in the East Bay.