Sublease Space Remains Biggest Challenge For Office Sector
As the economy continues to rebound from the pandemic, the glut of available sublease space remains the biggest hurdle for the office sector’s recovery.
According to new research from CBRE, the amount of sublease space on the market will likely take several quarters to wind down. But despite that, some markets are seeing sublease space decline, and new sublease additions are decreasing in other regions.
The U.S. Sublease Availability Index was at 194 for July, according to CBRE, and nearly all of the 12 markets the firm tracks still have relatively high amounts of sublease availability.
But “there are signs of improvement,” CBRE’s analysts say: after rising by an average monthly rate of nearly 6% for most of 2020, U.S. Sublease Availability Index growth declined to an average of less than 2% per month this year. And last month marked the first since the pandemic began that the index level fell to 194 from the peak set in June 2020.
Six of the 12 markets CBRE tracks have an index lower than the U.S. average: Houston (96), Washington D.C. (136), Dallas/Ft. Worth (156), Los Angeles (160), Boston (164) and Chicago (187). Manhattan (194) was on par with the U.S. average, and Atlanta (195) was a point above.
Houston had the lowest Sublease Availability index, but the city has seen its sublease availability grow over the course of the pandemic and is at an historic high. The index levels in Atlanta, Boston, Chicago, Dallas/Fort Worth, Los Angeles and Manhattan all fell in July. Meanwhile, Denver (207), Philadelphia (214), Seattle (285) and San Francisco (337) all have higher-than-average indices.