Tuesday, September 29, 2020

Office Sublease Space Increases by 21.8%

 by Les Shaver Globest.com

As COVID-19 forced lockdowns across the country, the amount of vacant sublease increased in the first half of 2020.

Activity across 83 office markets and 92 industrial markets in North America and determined that sublease vacancy generally increased across the office market and minimally throughout the industrial market in the first half of the year.

They found that 15 million square feet of total office sublease space was added to the market in the first half of the year. The market experienced a 21.8% increase in total office sublease space, which accounts for 1.4% of total office inventory. As overall space increased, so did the vacancy rate. US sublease vacancy is 10.5% of total vacancy, which is an increase over the 9.2% posted in Q4 2019

The Western US saw the largest increase in sublease vacancy. Eighteen of the 22 (82%) markets in that region recorded an increase in sublease vacancy. In the Midwest, eight of ten (80.0%) markets saw increases. Vacancies increased in nine of 16 (56%) markets in the Northeast.

In 35 markets, office sublease space grew by more than 100,000 square feet. Tech markets were hit especially hard. San Francisco led the way with a 46% increase in vacant sublease space, while San Mateo County (the San Francisco Peninsula) was second at 33.8%. Manhattan placed third with a 26.3% increase, while tech hubs Vancouver (25.5%) and Austin (24.8%) rounded out the top five. Santa Clara (Silicon Valley) was sixth at 24.0%. 

On the industrial side, 12.5 million square feet of total sublease space was added to the North American industrial market. In the US, there was a 28.7% increase in total sublease space added to the market. Sublease space rose from 5.5% in Q4 2019 to 6.3% by the second half of 2020. 

The Western markets saw the largest number of markets reporting heightened sublease activity in the first half with 76.0% reporting increases. Only about one-third of the markets in the Northeast and Midwest reported industrial increases.

Only 18 industrial markets added 200,000 square feet or more of sublease space in the first half of 2020. Santa Clara County led the way with 31.7% of all vacancy sublease space.


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