Snapshots

Sublease additions have significantly declined since December 2022

January 30, 2024

Contributors:

Sublease additions fell significantly last December to 1.6 million s.f. from a peak of 7.2 million s.f. in December 2022.

The sublease market continues to normalize, with December reflecting the fewest additions since September 2022, and total Q4 additions falling 18% QoQ. While some tenants delayed decisions at year-end for early 2024, January additions continue to stabilize, totaling 2.8 million s.f., slightly lower than the monthly average in Q4.

The slowdown in new additions to the market, coupled with accelerated backfill activity, drove the first decline in overall sublease vacancy since late 2021, with sublease vacancy falling 5 basis points nationally back to 3% last quarter.

Recent backfill activity includes Duolingo taking 86k s.f. of the Spotify space in the World Trade Center submarket of New York, Walmart Labs taking 720k s.f. of the Meta space in Silicon Valley, OpenAI taking 486k s.f. of the Uber space in the Mission Bay/China Basin submarket of San Francisco, and Anthropic taking 230k s.f. of the Slack space in the South Financial District of San Francisco.

Historically, sublease additions have borne a strong correlation to public equity prices, particularly for the technology sector. The recovery in technology equity prices with the NASDAQ index hitting a 52-week high in recent weeks bodes well for the continued stabilization of the sublease market in 2024.

Law firm leasing is exceeding pre-pandemic levels

Positive leasing momentum in recent quarters has driven gross U.S. office leasing activity to 75% of pre-pandemic levels.

Conversions are helping offset the rise in vacancy

Conversions are mitigating the rise in vacancy

Office demand continues steady path of recovery

Office requirements trending upwards for four consecutive quarters