The wind’s gone out of the great sublease balloon that supposedly spelled doom for the city’s office market.
Manhattan office sublease availability has fallen to less than in 2019, according to Transwestern — down to just 11.8 million square feet in the third quarter, compared to 12.3 million before the start of the pandemic and a high of 23 million in early 2023.
But wait — wasn’t the sublease “glut” going to wreck the progress that was made since COVID-19 ravaged the economy?
CoStar News in April 2023 cited a Savills warning that, “Companies putting spaces up for sublease reached an all-time high of 22.4 million square feet in the first quarter,” or 24.6% of all Manhattan office availability at the time.
An even gloomier essay posted on The City in May 2023 described Big Apple office market “deterioration” due to “scores” of empty buildings, high interest rates, $16 billion in outstanding debt, sublease volume, and the usual bogeyman of work-from-home.
Now, however, Transwestern reports that sublease offerings have fallen to 18% of Manhattan availability. Most spaces still up for grabs were smaller than 25,000 square feet, although a few large blocks remained.
“We’ve been keeping an eye on the sublease levels for a few years now, first as they ballooned during the height of the pandemic, and with optimistic expectation as they slowly subsided over the past few quarters,” said Transwestern research manager Corrie Slewett.
“It’s a notable milestone that Manhattan’s available sublet space has settled below the pre-pandemic levels,” Slewett added.
Recent, large sublease deflations included Paramount Global, which last month yanked 92,5000 square feet from availability at 1515 Broadway.
Large absorption deals included Blackrock’s 193,000 square feet from Meta at 50 Hudson Yards; Robinhood’s 125,400 square-foot sublease from MSG at 2 Penn; and Sixth Street Partners’ 103,400 square feet from Pfizer at The Spiral.
CBRE global brokerage head Stephen B. Siegel commented, “The market is on fire and the absorption of sublease space is a natural by-product of that. The reduction is attributable both to tenants expanding and others deciding to keep space they previously planned to give up.”
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