With several significant lease transactions signed in the second quarter, the excess of sublease availability has begun to shrink in Midtown Manhattan. In fact, the drop in sublease availability was entirely responsible for the overall Midtown availability rate falling 30 basis points over the last three months (to 13.2 percent).
The actual sublease square footage available now stands at 5.9 million square feet, down from 6.6 million square feet in the first quarter and the lowest since the 4.9 million square feet that were available in the third quarter of 2008. To put these numbers into perspective, the quarterly average for sublease availability (since the fourth quarter of 1991) is 5.6 million square feet. Midtown is now back within sight of that figure.
No doubt there continues to be some prime sublease space availability across Midtown—especially in the Newmark Grubb Knight Frank submarkets of Sixth Avenue/Rock Center, Grand Central and Park Avenue. The Sixth Avenue corridor, in fact, had been overflowing with sublease availability but took a nosedive in the second quarter, falling to just over 1.3 million square feet from two million square feet in the first quarter (as in Midtown overall, the lowest since the third quarter of 2008). On the flip side, the NGKF Park Avenue submarket recorded an increase in sublease availability in the second quarter, though a much less dramatic shift, with about 170,000 square feet added (thanks to a block at 299 Park Avenue which may actually be leased soon).
Since the “Great Recession,” sublease availability has eased before only to reverse course and rise again as many larger corporations went through a second round of restructuring and consolidation procedures. The original recovery began in the second quarter of 2009, when the sublease figure topped a record 10.4 million square feet and declined to 6.1 million square feet in the fourth quarter of 2011, before once again starting its ascent.
Two asides for you to ponder until next week: first, sublease availability, especially space with significant terms left, can obviously affect average asking and taking rents across a market; and second, direct availability remains very steep in Midtown, reaching its highest quarterly figure since 1992.