In a "knee-jerk" reaction to the dot-com frenzy, some companies banked space to make sure they would have room for future expansions, according to Zach Siegel, a senior director at Cushman & Wakefield. The glut of sublease space and rising vacancy rates are expected to continue pressure on the wobbly market here through the rest of the year, according to a report from Colliers International.
More than 1.84 million sf of vacant sublease space came on the San Jose market during the first quarter of 2001, according to the Colliers report. Added to the 5 million sf of direct vacant space and overall vacancy increased nearly 75%, from 1.38% to 2.41%.
In addition, 11.6 million sf of space being offered for lease or sublease, according to the Colliers report, is not presently vacant. Tenants in possession of this sublease space will "simply consolidate businesses when their space is leased."
Colliers shows an "availability rate" of 6.48% for all space occupied or vacant that is currently being offered for lease. To exacerbate matters, total leasing activity for the first quarter of this year was the lowest since Colliers began tracking absorption in 1988. The 3.60 million sf of leased space combined with the growing inventories resulted in a negative net absorption of 2.25 million sf, a trend Colliers experts expect to last through the second quarter.
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