One sure sign that the future of the office is up in the air is the increase in office space subleasing.
In the Columbus market, there were 95 available spaces for sublease in January – representing about 1.2 million square feet – according to a Colliers report.
That is more than double the 500,000 square feet of sublease space that was available at the same time in 2019. Some 81% of the current subleases have come on the market since the pandemic started.
In 2020, when most of the workforce went home, the amount of sublease space shot up to nearly 1.5 million square feet.
The last time there was a large spike in sublease space available like this was in 2008 and 2009, during the Great Recession. There was about 1 million square feet available in the Columbus region in 2009, according to the Colliers data.
Statewide, Colliers said there currently is about 3.2 million square feet of sublease space. In the first quarter of 2020, there was about 886,000 square feet of space available for sublease in Ohio. The next quarter, there was more than 1 million square feet and that figure has continued to climb.
Nationwide, there is about 204 million square feet of available sublease space on the market, Colliers found.
In the Columbus market, the majority of space available is considered Class B, according to Colliers.
The fourth quarter of 2021 saw positive absorption for the first time in six quarters, according to CBRE’s fourth quarter report, meaning more space was leased than what was vacated or built in the market.
According to CBRE, most of the leasing activity was for Class A space, supporting the idea that there’s been a flight to quality among tenants in the market.
According to JLL, the final quarter of 2021 was the local office market’s strongest since the onset of the pandemic. Even though net absorption year-to-date was negative, there was more than 900,000 square feet of leasing activity. And most of those tenants are scheduled to occupy the space they leased this year.
The majority of sublease space available in the Columbus area is in the central business district. And nearly one-third of current subleases are in the city’s central business district.
Many companies have listed space for sublease, whether they’ve pivoted to some form of hybrid work or are looking for a fresh start in a new office.
For example, American Electric Power Co. is subletting 12,000 square feet at their 80 E. Rich Street building, according to CoStar.
Therace Risch, chief information and technology officer for AEP, said the company had reopened offices in November for teams to start coming back, but when Covid cases began climbing again, many were asked to go back home.
Risch said it is still too soon to know whether AEP will reduce its overall office space. She said the company constantly reevaluates its real estate needs.
Nationwide is subleasing just less than 300,000 square feet – 135,000 square feet in Grandview Yard and 160,000 square feet in the Arena District.
Nationwide also is still evaluating its long-term office real estate strategy.
Wayne Harer, executive managing director of Newmark Knight Frank, said the Columbus market can be difficult to sublet because there is so much space available. And he predicts there likely will be more spaces listed this year for subleasing.
“A lot depends on what goes on with the (Covid-19) virus,” he said.
Harer said to attract and retain new employees, companies need to be flexible. “There’s not one right answer,” he said. “No one has a crystal ball.”
Matt Gregory, senior vice president with NAI Ohio Equities, said larger blocks of sublease space tend to stay available longer. Smaller, more creative spaces are snatched up quickly, he said.
Some 82% of sublease space is less than 20,000 square feet. And 39% of available space is less than 5,000 square feet.
If the amount of space for sublease continues to grow, rents could continue to drop. Sublease asking rents typically are 11% lower than direct market rents, Colliers found.
Harer said some sublease rents are 50% to 75% less than the original rent.
“I think a lot of tenants think half is better than zero,” Harer said.