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North America Office Space for Sublease | Q4 2021

Sandy Romero • 2/3/2022

Office Sublease Inventory Declines for Second Straight Quarter 

North American sublease inventory trended down in the last two quarters of 2021, after seven quarters of increasing inventory. The timing matches a similar path to the previous two recessions when sublease space increased for approximately two years before hitting its high point and receding. 

In Q4 2021, North American sublease inventory declined by -4.8% quarter-over-quarter (QoQ). Current inventory is 138.1 million square feet (msf), down from 145.1 msf in the previous quarter. 

Sublease Inventory Drops Correlated with Leasing Activity 

Total office leasing activity turned a corner in 2021 in the U.S. National leasing activity was up 13.3% year-over-year (YoY), and Q4 leasing was up 29% from Q4 2020. This demand is showing up in the sublease market. 

Among the 20 markets with the largest declines in sublease inventory in Q4 2021, 15 had higher YoY leasing activity growth than the national average. And five of these markets had YoY leasing growth above 50% (Boston, San Mateo County, San Francisco, Austin and Miami)

Occupiers were much more active with office leasing in 2021, partially due to favorable effective rental rates, particularly in the sublease market. Additionally, given the uncertainty related to how more agile workforces may look in a few years, the shorter lease terms often required with a sublease are currently considered a benefit by some occupiers. 

CBD’s Share of Sublease Space Continues to Decline 

Relative to non-CBD submarkets, the pandemic more deeply impacted many Central Business Districts (CBDs), which led to less office usage and disproportionate increases in sublease over the past year-and-a-half. For example, 46% of North American sublease space added in 2020 was in CBD submarkets, even though CBDs account for only a third of total office space inventory. 

It's not surprising then that most of the sublease space decline is occurring in CBDs–59% of the decline in Q4 2021, for example. The change among U.S. gateway markets was flat with a QoQ minimal increase in share of 6 bps (from 58.2% in Q3 to 58.3% in Q4). 

Download the report.

Top 20 North American markets where office sublease inventory declined by over 100,000 sf between Q2 & Q4 2021:

San Francisco 2,268,402       Denver 576,830
Boston 1,912,305   San Mateo Co.
Manhattan 1,759,045   Charleston 463,750
Toronto 944,495   Puget Sound - E. 409,071
Atlanta 875,306   Richmond 331,396
Oakland 823,255   Dallas / Ft. Worth 312,925
Silicon Valley 728,263   Northern Virginia 288,672
Chicago 642,338   Washington, DC 224,124
Seattle 604,594   Jacksonville 179,271
Austin 582,556   Charlotte 170,845

U.S. Gateway      Canada

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