Snapshots

With concessions under pressure, leasing in pre-built space surges

November 01, 2023

Contributors:

As tenants have shifted into more defensive strategies and landlord concession packages continue to face pressure from capital costs, pre-built spaces including sublease listings and spec suites are generating heightened occupier attention and have seen more robust leasing activity in recent quarters as a result.

As sublease listings and spec suites have become more prevalent, leasing in these spaces comprised 24% of gross leasing in Q3, the highest share in more than 10 years. As a result, gross leasing activity in pre-built spaces has grown for two consecutive quarters, and in Q3 reflected 90% of pre-pandemic levels.

Despite upfront landlord costs, pre-built spaces can minimize other concessions and support effective rents: the highest-rent lease year-to-date was AIMCO’s nine-year lease in SL Green’s One Vanderbilt which was executed at $247 per s.f. for pre-built turnkey space.

Active tenants continue to target pre-built sublease listings to procure high-end space at discounted rates: OpenAI recently executed the largest lease of 2023 in the San Francisco Bay Area, subleasing nearly half a million square feet of Uber’s Mission Bay headquarters.

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Sun Belt markets are exceeding 98% of pre-pandemic office leasing volume over the past six months

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