Westside Sublease Office Rents Fall

The sublease office stock is increasing on the Westside, and the growing supply is driving rental rates down. According to research from NAI Capital, the supply of sublease office space has increased 10% this year, and it is now a 9.2% discount to direct lease rents. That is a 5.7% decrease in sublease rents over the third quarter 2016. If this trend continues, it will begin to impact direct lease rental rates, according to Ian Strano, an EVP at the firm. We sat down with Strano for an interview to talk about the increasing sublease supply, decreasing rents and why office demand has waned.

GlobeSt.com: What is driving sublease rental rates down?

Ian Strano: This has been a slow year for leasing. At the beginning of the year, subleases began to come onto the market. What concerns me is that subleases that came on the market at the beginning of the year are still on the market. If this was a vibrant market, then the sublease space should be absorbed. What is occurring now is that sublease tenants are lowering the rent to try to move the space. I am finding that even when the rental rate is lowered, activity for sublease space is not tremendously high. That is a concern for the market and where the market goes from here.