Manhattan overall sublet availability took a nosedive in January to 8,880,280 square feet from 9,795,469 square feet in December. It has now fallen to its lowest figure since the 8,623,604 square feet recorded in August 2008—in other words, since just one month prior to the Lehman Brothers collapse of September 2008. At that time, financial services firms (and other industries) had already begun to dump large blocks of sublet space on the market.
In fact, the figure started its climb in January 2008, exactly one month after the official start of the U.S. recession. During the downturn, the number skyrocketed to as high as 17,325,712 square feet (May 2009) with 67 percent of that located in Midtown. The most recent improvement was widespread, encompassing all the major submarkets (Midtown down 7.1 percent, Midtown South down 10.5 percent and Downtown down 19.6 percent) as well as all building classes (Class A down 5.5 percent, Class B down 14.2 percent and Class C down 23.8 percent).
These figures appear to point to a tightening market. It would also seem to give landlords an opportunity to push asking rents higher on direct availability without the competition of discounted pricing on sublet space. That said, Manhattan isn’t quite out of the woods yet. There may be a second round of availability increases as financial services firms (in particular) continue to right-size. However, there are two differences this go-around—the rise in availability will be nowhere near as steep, as many tenants have cut significantly already, and most of the increase will be on the direct side of the equation, as tenants just choose not to renew the lease on all or a portion of their space (or, in some very recent cases, not to exercise expansion options).
Robert Sammons, Cassidy Turley