The first half of 2013 has seen an unusual number of large office subleases, Peter Turchin, CBRE executive vice president, told reporters at the firm’s second quarter briefing last week.
Among 10 deals over 40,000 s/f that closed in the first two quarters are the Sumitomo Corporation’s sublease of 98,454 s/f at 300 Madison from the Canadian Imperial Bank of Commerce; Indeed subleased 49,536 s/f at 125 West 55th from MacQuarie Equities; and there were three deals in AXA Financial’s space in 1290 Avenue of the Americas, including a 148,421 s/f sublease by Morgan Stanley.
The Avenue of the Americas space also came on and off the market in a matter of months, Turchin said, an unusually quick turn-around for sublease space.
“I think that the tenant world has become very astute,” Turchin said; instead of offering up the back office, tenants looking to sublease are now offering the most marketable space they can, and they’re offering more appropriate terms and build-outs.
The percentage of available Manhattan office space being offered for sublease is also at a five-year low.
Sublease space makes up 19.8 percent of available space at the moment. In June of 2008, in contrast, more than 30 percent of available office space was sublease space.
“Coincidentally, as you’ve seen sublease space dwindling down, you’ve seen pricing go up,” Turchin said.
Average asking rent for Manhattan sublease space is now over $60 psf, according to CBRE.
In Midtown South, the percentage of available space that is sublease space is 21.9 percent, compared to just 11.9 percent Downtown and 19.8 percent in Midtown.
The dynamics behind subleases are different in each submarket, according to Turchin.
“More often than not in Midtown South what you’re seeing is a tenant leased 8,000 feet six years ago and now they need 16,000 feet and, literally, they have to move,” he said.