Punching-bag Goldman Sachs has chalked up yet another reason to be evil-eyed: It is America’s (and New York City’s) No. 1 source of office sublease space.
That means that should the average, small-time businesswoman with nary a bailout to her name, yet all the same confronted with declining revenue and enough vacant office space to host a U2 concert, decide to put that space on the market, she’s bound to face some very stiff competition for subtenants from the bank that hatched Hank Paulson and Robert Rubin (and Matt Taibbi’s enraged takedown in the most recent Rolling Stone).
Goldman Sachs has 597,000 square feet available at 77 Water Street, according to a recent report by brokerage Jones Lang LaSalle detailing sublease space added to the market since the credit crisis hit in 2007. To be fair, the bank’s reasons seem pretty non-nefarious: Goldman Sachs is busy preparing to consolidate its operations by the end of this year to its glorious new 2.1 million–square–foot, 43-story, $2.4 billion headquarters at 200 West Street, designed by Henry Cobb.
New York’s supply of subleaseable office space has mushroomed a preposterous 139.2 percent since the second quarter of 2007.
Still, the surfeit of sublease space has helped send rents marketwide plummeting. In the third quarter of 2008, the average rent for a square foot of Manhattan office space was $73.14. In the second quarter of 2009: $59.36. It’s supply and demand. Not only does the Goldman space hamper the ability of struggling companies, like our hypothetical businesswoman, to unload space they no longer need or can afford, but it also impacts the rents these companies—and office landlords generally—can charge.
And on and on the miserable cycle …
“When there’s more sublease space on the market, there’s more pressure on landlords to be competitive,” said Jones Lang LaSalle vice president James Delmonte.
According to a Goldman spokeswoman, the bank hired Cushman & Wakefield in January 2008 to market its excess space in New York.
IT’S NOT JUST LITTLE old Goldman that’s making things more difficult. No. 2 on the list: JP Morgan, which has 456,842 square feet available at 277 Park Avenue. Sublease-glutter No. 3 is PDL BioPharma, which has 447,745 square feet available in Redwood City, Calif. No. 4: Google! The “Don’t be evil” firm has 412,406 square feet scattered about at five buildings in Palo Alto and Mountain View. And rounding out the top five nationwide: Fox Interactive, which has 380,000 square feet of sublease space available in L.A.