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New York Offices Face Double Trouble

City’s supply of sublet offices is swelling just as developers are building lots of shiny new blocks

On a recent call with investors, an executive at one of Manhattan’s biggest commercial landlords, SL Green Realty, said the recovery of the city’s office market was “all green lights.” Two trends suggest it is early for this kind of optimism.

State Street is the latest company to release sublet space into Manhattan’s already glutted office market, according to a report this week in The Wall Street Journal. This follows similar moves by corporate tenants including Peloton and Macy’s who are trying to shed property. JP Morgan Chase, whose Chief Executive Jamie Dimon is publicly bullish about returning to the office, has put 700,000 square foot up for sublet at 4 New York Plaza.

If a company has several years left on a lease, sublets can be a useful way to cut property costs. The trend is bad news for the city’s landlords, however, who now face tough competition from their own tenants. On average, the asking rent on sublet space in Manhattan is 27% lower than the cost of a direct lease, based on Colliers data.

 

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Franklin Wallach

Executive Managing Director

New York

Franklin Wallach is a Senior Managing Director, Research at Colliers International. Franklin's role includes a focus on quarterly and monthly trends within the Manhattan and Brooklyn office markets while using multiple databases and maintaining contacts within the industry in order to provide in-depth market analysis to brokers and clients.

Franklin reports on the office market on a monthly and quarterly basis through analytical reports as well as presentations to tenants, landlords and the press. Data analyzed by Franklin includes: average asking rents, availability rates, concessions, absorption, tenants in the market, leasing activity, construction and future tenant demand. Franklin has been quoted by numerous New York City commercial real estate periodicals including The Real Deal and GlobeSt.com.

Franklin joined Colliers after working in CBRE's Lower Manhattan office as a Senior Research Analyst.

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