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.

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