The office sublease surge showed signs of abating late last year as companies juggled hybrid work plans and signed for space, but the rise in nationwide availability was back on in the first quarter of 2021.
Sublease available rose 3.6 percent to 159 million square feet across the country, according to CBRE data reported by the Wall Street Journal. The availability is significantly higher than pre-pandemic levels and only 3 million square feet shy of the pandemic high.
In Manhattan, the amount of sublease space available is near record highs. According to Savills, more than 20.2 million square feet were available in the first quarter. That’s down from the 22 million square feet available a year ago, but well above the 13.6 million square feet up for grabs in the first quarter of 2020.
Not every subleasing market is created equally. Along with Manhattan, San Francisco and Washington, D.C. are seeing close to historic highs, while booming Sun Belt cities have lower sublease availability.
The increase in sublease space is likely tied to a widespread increase in more permanent hybrid work scenarios. As a result, companies don’t need as much space as they signed up for prior to the pandemic.
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In New York City, a some major names have joined the search for subletters in recent months.
Warner Bros. Discovery is marketing a massive 450,000 square feet for sublease at 30 Hudson Yards, about a third of the company’s footprint at the building. S&P Global is marketing 140,000 square feet occupied by IHS Markit at 5 Manhattan West.
The sublease surge is rankling landlords amid low demand, a changing work environment and rising vacancies.
“There are not enough tenants who will absorb these spaces,” Savills vice chairman Jim Wenk told the publication.
Another crisis is on the horizon for landlords, as JLL data show about 243 million square feet of office leases are set to expire nationally this year.
[WSJ] — Holden Walter-Warner