Office sublease availability in Manhattan has soared to its highest percentage since 2010 as companies are squeezing into smaller spaces and moving to new buildings before their leases end.
A Savills Studley report shows 3.5 million square feet of sublease space has been added since June 2016 — a surge of 44.7 percent year over year. Meanwhile, the firm’s Jeffrey Peck says the new standard for space occupancy has dropped from a range of 200 to 225 square feet per person to just 125 to 135 square feet per person.
“Companies … are doing more with less and fitting into less space,” Peck said.
Confirming the trend, CBRE found subleases rose to 2.4 percent of the market compared with 1.8 percent one year ago, which appears to have marked the low point for the last dozen years.
Cushman & Wakefield also found sublease space in Midtown spiked 19.2 percent in the first quarter of 2017 but, since then, increased by just 6.7 percent in the second quarter.
Peter Turchin of CBRE is not concerned about the number of subleases, calling them “direct space, a few months premature.”
According to a new Skyline report from brokerage JLL, buildings with large sublease space include 399 Park Ave., 520 Madison Ave. and 540 Madison Ave.
“A lot of the subleases are staying on the market longer, and I see the brokers offering incentives for completed transactions,” added Jon Rudes of the Vortex Group.
Despite the increase in sublease space, Cushman & Wakefield found strong second-quarter leasing caused direct available space in Manhattan to decline by 4.7 percent, so year-to-date absorption is still a positive 2 million square feet.
Cushman & Wakefield also found sublease space in Midtown spiked 19.2 percent in the first quarter of 2017 but since then, increased by just 6.7 percent in the second quarter.
Midtown South’s sublease space increased 51.9 percent over the past year, C&W said, which resulted in its highest quarterly level since 2009. Sublease space accounted for 28.3 percent of that submarket’s total availabilities and is the highest ratio since 2003.
The majority of Midtown South sublease availabilities are in Chelsea where overall vacancy hit a 12-year quarterly high of 8.9 percent. CBRE similarly found Chelsea sublease space totaling 673,949 square feet, accounted for 4.4 percent of its total 14.1 percent availabilities.
Peter Turchin of CBRE is not concerned about the number of subleases, calling it, “direct space, a few months premature.”
CBRE stats show over 1 million square feet of subleases available in each of Midtown’s Park, 6th/Rock Center and Grand Central submarkets, where there is a total of 5.78 million square feet or 2.5 percent of the submarket’s 23 million square feet for lease.
Midtown South had 2.33 million square feet in subleases or 3.1 percent of the 10.7 percent in availabilities, CBRE found, while Downtown had 1.41 million square feet or 1.6 percent of the 12.7 percent in overall availabilities.
A year ago, CBRE says Downtown’s Financial area had 1.19 million square feet up for sublease alone representing 2.2 percent of its availabilities, and along with the PAS/Mad Sq. area which dropped from 635,271 square feet to 552,508 feet –- 3.2 percent to 2.8 percent — was the only submarket where sublease offerings fell year-over-year.
According to a new Skyline report from JLL, another brokerage, buildings with large sublease space include 399 Park, 520 Madison and 540 Madison.
“A lot of the subleases are staying on the market longer and I see the brokers offering incentives for completed transactions,” added Jon Rudes of the Vortex Group.
