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ETC... ETC... NEWS
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San Francisco Sees the Largest Decline in Sublease Space in the Country

4/25/22

This report provided by real estate services firm Cushman & Wakefield


Sublease Inventory Declines for Third Straight Quarter

United States sublease inventory continued to trend down in Q1 2022, after seven quarters of increasing inventory. The timing matches a similar path to the previous two recessions when sublease space increased for approximately two years before hitting its highest point and then receding. At 122.4 msf, available sublease space is down 7.6% from its Q2 2021 peak (132.4 msf). It currently accounts for 2.2% of total U.S. office inventory.

Changes in Sublease Space Are Widespread

Sublease inventory declined quarter-over-quarter (QoQ) in nearly half of tracked U.S. markets (42 of 89). As of Q1 2022 sublease availabilities are down year-over-year (YoY) in 37 markets, with significant drops in many of them:

Market Decline (YoY)

San Francisco 2.7 msf
Boston 1.7 msf
Greater Seattle 1.7 msf
San Mateo Co. 1.4 msf
Dallas/Ft. Worth 1.2 msf
NY - Midtown So. 1.0 msf
Oakland 0.9 msf
Atlanta 0.8 msf
Austin 0.7 msf
Chicago 0.6 msf

How Does Sublease Space Compare with Past Peaks?

• In Q1 2022, total sublease space declined 1.2 msf to 122 msf.
• The U.S. total has fallen 1.5% below the DCR1 peak and it represents a smaller proportion of total office inventory (2.2% vs. 2.9% in Q2 2002).
• The amount of sublease space on the market remains 38% higher than at the height of the GFC2 and exceeds the GFC’s proportion of total inventory (1.8% in Q4 2009).
• During the GFC, U.S. sublease space increased for nearly two years before peaking in Q4 2009. From there, it dropped 28% over the next four quarters and hit its lowest point in Q4
2013 (17 quarters after peaking).

1 DCR – Dot-Com Recession (peak Q2 2002)
2 GFC – Great Financial Crisis (peak Q4 2009)


Share of Office Inventory

• In Q1 2022, vacant sublease space accounts for over 2.0% of total office inventory in 28 markets, led by:

Fairfield County, CT (6.5%)
San Francisco (6.1%)
Manhattan (5.0%)
Austin (4.4%)
NJ - Northern (4.2%)

• In the U.S., the 122 msf of sublease space is the equivalent of 2.2% of total office inventory (5.6 bil sf).
• Four of the six U.S. gateways now have lower proportions of sublease space than the national average

Large Markets Recovering

• Sublease availabilities in the six gateway markets more than doubled between Q1 2020 and
Q2 2021. However, as of Q1 2022, gateway markets have trimmed their sublease inventory by 8.1 msf, a 17.1% drop from the Q2 2021 peak.
• The overall U.S. sublease inventory has fallen by 10.0 msf, a 7.6% drop from its peak.
• The share of sublease inventory in gateway markets went from 29.8% prior to the pandemic to
35.6% in Q2 2021. The gateway share has been receding and currently sits at 32.0% of total
U.S. sublease availabilities.

Localized Improvements

• Sublease space dropped QoQ in 47% of U.S. markets. This includes 19 markets where sublease inventory declined by more than 100k sf.
• Sublease inventory dropped by more than 10% QoQ in 19 markets. On a percentage basis, the largest QoQ declines were in Detroit (-70%), Brooklyn (-41%) and Memphis (-40%).

Quarterly Change in Vacant Sublease Space

U.S. CBD U.S. Suburban
• The share of sublease space in the CBD declined slightly in Q1, from 40.1% to 39.2%.
• In 2020, 49% of new sublease inventory added was in CBD submarkets.
• Sublease inventory in CBD submarkets doubled from 25.4 msf in Q1 2020 to 54.3 msf in Q2 2021. Over the last three quarters CBD sublease availabilities have declined by 11.7% (-6.4 msf) while suburban sublease space has declined by 4.7% (-3.7 msf).


This report was prepared and provided by:

Sandy Romero
Research Manager, Global Research
Cushman & Wakefield

David C. Smith
Head of Global Occupier Insights
Cushman & Wakefield





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