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.