Manhattan Office Sublease Market Sees Improvement
It appears that the anticipated crisis in Manhattan’s office sublease market may not be as dire as once thought.
Recent data from Transwestern indicates that office sublease availability in Manhattan has actually dipped below pre-pandemic levels, now sitting at 11.8 million square feet as of the third quarter. This figure is lower than the 12.3 million square feet recorded before COVID-19 and down from a peak of 23 million square feet in early 2023.
But then again, wasn’t the narrative of an “oversupply” of subleases expected to reverse any gains made after the pandemic? It’s curious.
A report from Coster News earlier this year cited Savills, highlighting that subleasing had hit a record 22.4 million square feet in the first quarter, which made up 24.6% of the total office availability in Manhattan.
To add to the gloom, a May 2023 piece in The City painted a rather bleak picture of the office market, detailing numerous vacancies, high-interest rates, a staggering $16 billion in debt, and, of course, the ongoing trend of remote work.
However, Transwestern now notes that sublease listings have fallen to 18% of overall Manhattan availability. While many of the remaining spaces are under 25,000 square feet, some larger options still exist.
“We’ve been monitoring sublease levels for several years,” said Cory Slewett, the research manager at Transwestern. “Initially, we thought sublease levels would rise sharply during the pandemic and then gradually decrease, which seems to be happening.”
Interestingly, subleasing activity is also being fueled by some significant moves. For instance, Paramount Global recently withdrew roughly 925,000 square feet from the market at 1515 Broadway. Additionally, BlackRock took over 193,000 square feet at 50 Hudson Yards from Meta, while Robinhood sublet 125,400 square feet from MSG in Pennsylvania 2 and 103,400 square feet of Pfizer’s space at The Spiral from Sixth Street Partners.
“The market is really heating up, and the decline in sublease space is just a natural outcome of that,” commented Stephen B. Siegel, head of global brokerage at CBRE. “This drop can be attributed to tenant expansions and companies opting to keep spaces they had originally contemplated releasing.”
So, while the office market faced significant challenges post-pandemic, it also seems to be finding its footing again, albeit with some twists and turns along the way.
