Sublease space fell in more than 50 percent of the 91 markets tracked
New research reveals that for the first time since Q3 2019, the amount of sublease space available in North American markets has declined, according to a report released by Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm.
North American total sublease space peaked in Q2 2021 and fell 0.8 percent in Q3 2021. In the U.S., vacant sublease inventory fell 1.5 percent quarter-over-quarter (QoQ), from 132.4 to 130.4 million square feet (msf). Canada continued to see an increase, with a 2.6 percent increase in space (+346,000 sf). Mexico also rose slightly to 1.1 msf.
“We’ve seen some instances of occupiers removing large chunks of their own sublease space from the market as they develop clearer workplace strategies for a post-COVID-19 workforce. However, most of the decline in sublease space in Q3 is due to subleases being signed with new occupiers,” said David C. Smith, Cushman & Wakefield’s Head of Global Occupier Insights.
The pandemic more deeply impacted many Central Business Districts (CBDs), leading to less office usage and disproportionate increases in sublease over the past year-and-a-half. For example, 46% of North American sublease space added in 2020 was in CBD submarkets, even though CBDs account for only a third of total office space inventory.
The decline in sublease space, however, is being led by CBD submarkets. In Q3 2021, 83% of the decline in sublease inventory occurred in CBDs.
“Although total sublease space has fallen, there is still a significant amount of space in the market. In Q3 2021, there are 35 North American markets with 1.0+ msf of office sublease vacancy and 22 different markets with 2.0+ msf,” said Smith. “In the Great Financial Crisis, we saw a similar number of markets hitting the 1+ msf threshold, but only 10 surpassed 2 msf.”
