Availability of Sublease Office Space Grows Along with Demand

In what may be a cause-and-effect of the increasing adoption of hybrid work and flexible office use as the pandemic winds down, the availability of sublease office space increased in Q1 2022 at the same time that demand for sublease space was greater than it has been during a first quarter in six years.

According to a new report from CBRE, sublease availability increased by 3.6% in Q1 while the leasing of sublease space rose 60% YOY during the same period.

During the second half of 2021, sublease space nationally fell by 5.4% as some occupiers took advantage of economical pricing, CBRE said.

“Historically, Q1s have the lowest amounts of subleasing activity of all other quarters. Therefore, Q1 2022’s surge in activity may be a harbinger of bigger quarterly increases to come,” the report said.

While the pace of sublease space additions has been moderating over the previous six quarters, it increased to 159M SF in Q1, slightly less than the peak of 162M SF in Q3 2021, CBRE said.

Sublease availability remains above pre-pandemic levels in every major market, but some of them are seeing modest improvements, the report said. Minneapolis, Philadelphia and San Jose had the largest increases in sublease availability in Q1, while Manhattan, San Francisco and Washington DC had the most total available sublease space, CBRE said.

The demand for subleases is being driven by the rapid adoption of hybrid work strategies that require more flexibility in office footprints.

In a recent study, Cushman & Wakefield said companies are adjusting to the reality that a majority of workers are opting for hybrid work strategies as they come back to the office.

“There are two statistics that jump off the page in this report,” David Smith, global head of occupier insights at C&W said. “First, 60% of workers prefer a hybrid working arrangement, and the majority of companies that have made decisions are currently planning on hybrid, agile work environments. More will go in this direction as leases expire; the hybrid movement has just begun.”

Smith added, “second, despite the work-from-home rhetoric, market data shows office leasing volume globally is surging back, up nearly 40% on a 12-month trailing basis compared to a year ago. To a degree, the hybrid solution is galvanizing the corporate need for office space as the workplace gets reimagined.”