Manhattan Sublease Expirations More Frequent
They comprise 15.3% of removals since start of pandemic, Savills reported.
Term expirations are showing up more frequently in the Manhattan sublease market, according to Savills’ Manhattan Sublease Q3 2022 Report.
While subleases have accounted for 47.2% of sublease removals since the start of the pandemic, 15.3% of removals have been term expirations, Savills reported.
Sublease supply is down 1.8 msf from Q1 2021’s peak of 22 msf (27.6%) of total available space). Supply declined in Q3 2022, “but is likely to remain elevated in the quarters ahead amid a backdrop of heightened economic uncertainty,” the firm said.
Sublease Space ‘Losing Steam’
Avison Young sees similar. Danny Mangru, regional manager of innovation and insight, Avison Young, tells GlobeSt.com that available sublease space peaked in Q2 2021 at 24.1 million square feet.
“Throughout the first half of 2022, an abundance of sublease space hit the Manhattan office market, but the growth of available sublease space has begun to lose steam in the second half of 2022,” he said.
Total sublease availability marginally decreased from Q2 to Q3, decreasing by about 100,000 square feet – keeping the sublease availability rate at 4.5% and total available sublease space at 23.3 million square feet, according to Avison Young.
“Available sublease space is still near historic highs, largely due to tenants’ uncertainty relative to the pandemic, permanent shifts in workplace strategy, and future economic conditions,” Mangru said.
Available Direct Space Swelled by 66.7%
Furthermore, the report showed that since Q1 2020, available sublease space has increased by 48.2%, while available direct space has swelled by 66.7%.
The asking rent spread between direct ($80.93) and sublease ($60.31) space compressed to 25.5%, as both direct and sublet asking rents declined on the quarter.
Noteworthy is one unconventional, off-market deal, representing the most significant sublease activity in Q3. It removed 423,957 sf of sublet space from Publicis Groupe at 1675 Broadway, which was taken by an IT firm.