Sublease availability plummeted in November, dropping to 9.55 million square feet.
This is the first time it has fallen below the 10 million mark since January 2012 (9.96 million square feet) and the lowest it has been since September 2008 (9.51 million square feet). If that last date sounds familiar, it is likely because this was the same time as the Lehman Brothers bankruptcy—good times!
The current figure also is well below the monthly historical sublease availability average of 11.14 million square feet.
The latest decline in sublease space was not due to any one particular block. Instead, numerous spaces across all three submarkets of Manhattan were either leased or withdrawn. Here are some of the highlights:
Sublease space availability fell across all of the NGKF Midtown districts except one, upper Fifth Avenue/Plaza, though even there it was up just 16,000 square feet. The greatest declines occurred in the Grand Central and west side/Times Square districts. The Bank of Montreal expansion into former Bain & Company space at 3 Times Square was one of the larger transactions at 56,000 square feet.
Midtown South recorded the smallest decline of the three submarkets as a drop in space in both the Park Avenue South and Times Square south districts was almost but not quite canceled out by an increase across several properties in Flatiron/Union Square.
Downtown got in on the action with all three districts (Financial, City Hall/insurance and World Trade Center) seeing sublease availability shrink. The biggest single block removed was at 7 World Trade Center where Moody’s expanded its footprint into former Portigon (WestLB) space at the top of the tower.
For those of us who watch market fundamentals closely, this trend is significant, because a continuation of overall decline in sublease space would result in an increase in the total average asking rent. This is due to two reasons: One very simply is that sublease space generally has a lower price point than direct space, and two, without there being as much sublease competition, those controlling the direct space may be apt to push their asking rent higher. The current difference between the direct and sublet asking rent across all classes in Manhattan is $9.17 ($57.52 per square foot for direct and $48.35 per square foot for sublet).
By the way, in contrast to this dive in sublet availability, there was a rather steep climb in direct availability. Thanks can be given primarily to 4 World Trade Center, which was added to inventory in November, with its 1 million square feet of space now on the market. At the end of the day (or month, by our measure), the total availability ended up right back at 12.5 percent, same as in October.