With companies like Condé Nast and Liberty Mutual Insurance looking to sublet hundreds of thousands of square feet of office space, Lower Manhattan is looking at the highest sublet availability rate since 2010.
Downtown sublet space made up 2.3 percent of the market’s 105 million square feet at the end of May, according to figures from Colliers International cited in Bloomberg.
Other than the sublet availability rate of 2.4 percent in April, that’s the highest level since 2010.
At that time, sublet availability was driven by fallout from the 2008 financial crisis.
This time around, though, “Downtown is different from the last time sublet availability was this high,” said Franklin Wallach, managing director for tri-state commercial property data at Colliers.
“The residential population continues to grow, there’s more hotels, there’s more of a live-work-play environment,” he said.
It’s not great news for landlords. Sublet space is generally priced lower than direct space, so increased availability generally puts downward pressure on asking rents. Landlords are also offering free rent periods and other concessions to tenants, raising the costs of filling office space.
Landlords are certainly hoping that Downtown’s sublet space will move as quickly as Bank of New York Mellon’s. J. Crew in March agreed to take the bank’s entire 350,000 square feet at Brookfield Place. [Bloomberg] – Rich Bockmann