But the subleasing that is occurring is unlikely to make a dent in the numbers, experts said. Subleasing availability hit a 2012 high of 10.4 million square feet in July, before dropping to 9.7 million square feet in September and then ticking up to 9.8 million square feet in October, according to data from Cassidy Turley.
In many cases subleasing won’t even be reported—or recorded—because the terms are so short, said Robert Sammons, vice president of research with Cassidy Turley. At best, any dent would be temporary.
“These tenants can’t just walk away from their leases,” Mr. Sammons said. “They will ultimately have to fulfill their lease obligations and work something out with the landlords.”
Subleasing “doesn’t make sense for the landlord or the tenant when people are expected to be back into their old offices,” echoed Mr. Caltabiano.
In addition, sublease space in areas affected by the storm remains inaccessible, which will further keep absorption in check; and large blocks of older space will be even harder to fill than they were before the storm. Goldman Sachs, for instance, has “tons of space” at its former 85 Broad Street location, where the company still holds a lease, and it is unlikely to be filled anytime soon, one broker said.
Lower Manhattan’s freshly exposed vulnerabilities could perhaps lead some companies to permanently relocate to Midtown, Mr. Sammons said, adding that 6.9 million of the total 9.8 million square feet of available sublease space in October was located in Midtown.
But, he added, “I just don’t know how many you’re going to see, because it’s so expensive … the fact of the matter is that Lower Manhattan still is much cheaper than Midtown.”
In the same way that the hurricane will not cause significant long-term absorption of sublease space, a much beefier economy will also prevent a fallout similar to that seen after the 9/11 terrorist attacks or during the so-called Great Recession, when sublease availability skyrocketed, experts said.
The record high of 19.7 million square feet of sublease availability was recorded in November 2002; and 17.3 million square feet of space was available at the recession’s high point in May 2009, the Cassidy Turley data shows.
“Subleasing is largely employment-driven,” Mr. Caltabiano said. “Relatively speaking, we have done well through the recession, and the employment base is more than just financial services now, with tech and health care. There’s a stronger economy with less sublease space available, and there hasn’t been a lot of new construction. That’s not likely to change.”
The hurricane could, however, serve as a wake-up call for building owners, and tenants displaced by the storm will need reassurance that owners and management companies are taking steps to shore up defenses, create mechanical and electrical redundancies, and perhaps relocate critical equipment and systems to upper floors.
Buildings, perhaps like their “earthquake-proof” counterparts in California, should be held to new standards when—or if—a consensus is reached that the city is experiencing a new normal when it comes to extreme weather.
The Loma Prieta Earthquake that struck the San Francisco Bay area in 1989 caused 63 deaths, 3,757 injuries and an estimated $6 billion in property damage, according to the U.S. Geological Survey.
Glass shattered and some structural damage occurred at older high-rises, many of which were later retrofitted, said Garrick Brown, a director of research with Cassidy Turley, San Francisco. But, he said, “The disruption to the general market was minimal,” with old industrial and residential buildings taking the brunt of the damage.
“In a lot of ways, no modern event here has had a major impact on commercial space,” he said. But especially memorable was the community response, something New Yorkers and the real estate industry are experiencing now, and will clearly remember long after buildings have reopened and communities are rebuilt.
“It was huge; the power was out for a couple of days, and for weeks everyone was raising money to put people up whose apartments went down,” Mr. Brown said, recalling an event that occurred more than 23 years ago. “The city really came together.”