Second Wave of Sublease Availability Hitting Office Sector
San Francisco has 79% of sublet space on the market given back by the tech sector,
A so-called ‘second wave’ of sublease availability is on the horizon was 2022 draws to a close, with a staggering percentage of such space being given back by tech firms.
“The tech sector has been the main driver of net new growth for landlords, but quickly changing dynamics are forcing many of those companies to return space in the form of subleases,” according to Savills.
San Francisco has 79% of sublet space on the market given back by the tech sector the firm says, while Silicon Valley’s stat stands at 69% and Austin clocks in at more than 44%.
“With rising interest rates, tech startups are under pressure to decrease their burn rates while large tech companies seek to remain profitable amidst the increasing probability of a recession,” Savills analysts say in a new report. “Tech is hitting the brakes on hiring and some companies have begun to lay off employees. With an increased adaption of remote work and employee growth stifled in the near-term, there is a surplus of high-quality unused office space available in most tech cities, which will continue to put downward pressure on net effective rent costs in these markets.”
The percentage of sublease space on the market given back by tech companies is 36.3% in Seattle, 35.6% in New York, 34% in Boston, 17.9% in Atlanta and 16.6% in Los Angeles..