- 1 million SF of sublease space was added to the market
- Total available sublease space surpassed 7 million SF
- Addition of sublease space lead by financial services industry
- Goldman Sachs-600K SF at 77 Water Street
- RBS-140K SF at 7 WTC
- Nomura Holdings-110K SF at 2 WFC
- iStar Financial-107K SF at 1095 AofA
- Vacancy went up 40 basis points to 4.9 percent
- Leasing velocity down 15% compared to 1Q 07
- Total leasing activity was 7.6 million SF
- 48% of transactions were renewals in 1Q 08
- Blocks of available space 100,000 SF & greater
- 14 were added to the market during 1Q08; 26 in last six months
- 53 total blocks currently available
- At a minimum, another 20 blocks of space could be made available between now and 2010
- Class A asking rents edged up $1.14 to 90.20 per sf
So, what does this mean to you? Well, these stats certainly indicate a real change in the market. Lots of sublease space is becoming available, which increases supply and as such, will lower prices.
So, now you're thinking, if increase in supply results in lower prices, why have prices gone up?
As I mentioned in a previous post, there are many factors that come into play here:
- The big increase in sublet availability is entirely from large blocks of space which have impacted market availability and vacancy rates as a whole.
- Virtually no deals are being made on these big blocks yet, and since most of them are new to the market, asking prices are still high.
- 80% of deals made are 10,000 sf or less. Demand is still very high for these small spaces, and supply is very low.
- Leasing activity is way down because tenants (with good reason) are waiting until they get better deals.
- Sublessors are slow to respond to a changing economy, Landlords are even slower.
- Landlords have begun offering larger concession packages (free rent, work letters, tenant installation $, etc.) in place of discounting the rent.
I expect that we will see rents stabilize very soon and then ultimately come down. Stay tuned for Grubb's 1Q 2008 research report and the May report for more info.