A flood of new sublease space began hitting office markets nationwide over the summer, and New York was no exception.
Sublease supply in Manhattan stood at 16.1 million square feet by the end of the third quarter, representing 27 percent of the borough’s total available office space, according to a new report from Savills. That’s a 47-percent increase year-over-year, far outpacing the 14-percent increase in direct space availability over the same period.
“With many organizations planning to operate remotely into 2021, sublease space will continue to drive supply-side increases as more tenants look to shed space,” Savills’ New York & tri-state region research director Danny Mangru wrote in the report. “By the end of 2020, available sublease space will likely exceed peak Global Financial Crisis levels.”
The new sublease space hitting the market includes 37 blocks with 50,000 square feet or more, according to the report. The following table details some of the largest blocks added to the sublease market in the first nine months of 2020.
While the pandemic has accelerated the trend, data shows that office sublease availability in Manhattan had already been on the rise since 2016. It surged by 4.2 million square feet between the last quarter of 2018 and the first of 2020, according to Savills. From January through March, 12 blocks of 50,000-square-foot-plus sublease space hit the market.
The largest sublease block to hit the market so far this year came in the first quarter, with Time Inc. looking to sublet 221,400 square feet at 225 Liberty Street, also known as Two Brookfield Place. Also in the first quarter, 151,400 square feet of sublease space from First Republic Bank hit the market at 410 Tenth Avenue, a property that SL Green is reportedly seeking to sell.
Since the start of the pandemic, the largest new block of sublease availability comes from Starr Insurance Companies, which is looking to sublet 190,900 square feet at Boston Properties’ 399 Park Avenue in Midtown. Emblem Health has put up 163,000 square feet for sublease at 55 Water Street in the Financial District, while WeWork is looking to sublease 156,000 square feet at its global headquarters on West 18th Street in Chelsea.
By industry, tenants within the TAMI (technology, advertising, media, and information) sector are now taking up a larger slice of the sublease pie. While TAMI tenants accounted for 32 percent of new sublease space prior to the coronavirus outbreak — followed by financial services at 26 percent — they account for 45 percent of sublease additions since Covid hit, more than twice as much as any other sector.
Both Midtown South and Downtown already have higher office sublease availability now than they did at the peak of the last financial crisis, but haven’t yet reached the levels seen after the one-two punch of the dot-com crash and 9/11 attacks. Midtown, meanwhile, is still a few million square feet short of the subleasing availability peak it reached in 2009.