More Manhattan office sublease space is likely to become available albeit at a modest pace, as many organizations try to balance new, hybrid workforce strategies with their long-term space needs, says a second quarter report from Savills New York-Tri State Research Director Danny Mangru.
A larger wave of recently added direct available space has led to the significant rise in overall availability as sublet available space starts to decline, according to the report.
His study notes sublease supply dipped by 0.7 million square feet in Q2 2021 and now totals 21.3 million square feet (24.7% of total available space).
This is happening as over 50% of mid-size tenants—spaces above 20,000 square feet—have either re-occupied or backfilled their space instead of subletting them. Additionally, 25% of office spaces larger than 20,000 square feet have already been sublet, further compounding the declining sublet supply in Manhattan.
After seeing sublease space continuously increase during the pandemic, Mangru says that New York is finally witnessing a slowdown in space being put on the market, which is a good sign for the city.
Currently, his report says availability continues to surge due to a swell of direct space, despite decline in sublet supply. Over the past year, available direct space has increased by 62.4%, while available sublet space has increased by 56.8%.
The report also found that year-over-year average sublet asking rents ($59.16) have decreased 7.5% nearly the same as the 7.4% fall for direct asking rents ($80.51).
During the pandemic, while some occupiers opted to sublease due to permanent shifts in workplace strategy, many others tried to shed space opportunistically or as a short-term solution, leading to inflated sublease supply, the report explains.
“As a percent of total available space, sublease supply remained below both the Dot Com-9/11 crisis (44.2%) and Global Financial Crisis (30.3%) as direct space continued to flood the market,” it points out.