Sublease Space Continues to Burden Office Market
CommercialEdge just released its May national office report, analyzing the U.S. office market’s performance in the first four months of 2021. Sublease space has climbed since the start of the pandemic, as many firms look to reduce their office footprint. Among the top 30 markets covered by CommercialEdge, 20 saw total available sublease space more than double.
Here’s what else the data shows:
- Marking a 0.2% increase year-over-year, the national office rents rested at $38.32 per sq. ft. Analysis of individual markets showed average full-service equivalent listing rates span from just above $21 per square foot to roughly $83 per square foot.
- The national vacancy rate was 16% in April, an increase of 290 basis points over April 2020 levels.
- Although sales activity was low due to uncertain future, sale prices in April reached an all-time high average of $304 per square foot, as investors refine acquisition strategies.
- Office-using employment was up 6.4% Y-o-Y, but there are still 1M fewer (-3.1%) office jobs than the pre-pandemic levels of February 2020.
- Nationally, there are 162 million square feet of new space under construction, of which 70% are located in urban submarkets.
The impact of sublease space can be seen in Denver. Newmont Mining Co. relocated its headquarters months before the pandemic’s arrival, signing a lease for the sixth through 10th floors of 6900 Layton. During the pandemic, Newmont reevaluated its needs and listed two of the floors for sublease. DCP Midstream, a gas and oil firm, has agreed to take the ninth and 10th floors at the start of 2022, vacating 170,000 square feet at Republic Plaza in the CBD. Now, two of the Fortune 500 firms head-quartered in the Denver market will occupy roughly half the space they did previously.