Subleasing Increases in Offices Across the US

CHICAGO-A recent report from Jones Lang LaSalle shows office sublease space is up 13% nationwide since the beginning of the credit crisis last summer. However, some analysts say markets are only seeing the start of the increase in subleasing, and that rates will continue to climb in Q4 and into 2009. Despite this, market experts say they don’t foresee this economic crisis hitting the real estate markets as hard as did the last downturn.

“The markets that have placed large amounts of space on the market have been the markets most affected by the housing downturn, and the markets that have the highest exposure to mortgage and home building companies, and niche private equity financial firms,” says John F. Sikaitis, VP and director of research with Jones Lang LaSalle. “Where we haven’t seen a big increase so far are the margin markets in New York. New York is obviously a market we’re watching and I think in the coming quarters we’ll see a larger amount of space come onto the market.”

The report analyzed sublease space in the top 25 markets the company covers in the US from what they defined as the beginning of the credit crunch in June 2007 to the end of Q3 2008. In that span of time, the company reports seeing a 13% increase in sublease space in those markets. “Rents still aren’t discounted for sublease space as much as they were last time around in the crash in 2001, when we saw about a 25% discount,” Sikaitis says. “Now we’re down about 15% comparing direct rent in the market, but we expect that number to increase higher on future subleases. We think this time around though we won’t hit the peaks we established last time around.”