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New York City Subleasing Activity Remains Stable

Sublease activity remained steady in the first quarter with a reported 1.1 million square feet (msf) leased by new tenants in Q1 2022.

Although a decline from 1.8 msf in Q3 2021 and 1.9 msf in Q4 2021, sublease activity is expected to remain stable through the rest of the year. 

The supply of sublease inventory declined for the third consecutive quarter to 20.5 msf, while direct vacant space reached 65.4 msf. Midtown South recorded a 1.0 msf year-over-year decline of sublease availability, one of the highest in the country. Sublease supply in Midtown decreased for the third consecutive quarter to 11.3 msf but remained 55.2% higher than the pre-pandemic total of 7.3 msf. 

Despite the positive momentum of leasing activity, overall vacancy ticked up by 60 basis points (bps) during the quarter to a historic high of 21.0% as nine blocks, each greater than 100,000 sf, entered the market along with three new construction completions totaling nearly 1.6 msf. 

As sublease availability in Manhattan has climbed over the past two years, and as of Q1 2022 remains 79.2% above its pre-pandemic level in Q1 2020, sublease rents have come under increasing pressure. Averaging $56.27 psf as of Q1 2022, overall sublease asking rents have fallen 8.7% over the past two years, as compared to just 2.7% for direct rents. 

Manhattan sublease inventory declined over the last three quarters. Nationally, the share of sublease space has decreased in the CBD markets from 42% in Q1 2021 to 40% in Q1 2022, indicating a deceleration of vacant sublease space being added in CBD markets around the U.S. 

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