Demand in the office sector during the third quarter plummeted as business owners strive for economic recovery while managing pandemic-related uncertainty. Subletting either part, or all, of their current office space is one strategy tenants have deployed to recoup cost and minimize exposure, driving a sharp increase of available sublet space – larger now than during the dot-com bubble.
- A record 156 million square feet of sublet space is available now in the U.S., up 40 million square feet from the end of 2019.
- Sublet space has doubled in tech hubs such as San Francisco, Seattle, San Jose, California and Austin, Texas, since the end of last year.
- Chicago is not a purely tech-centric market; however, big players have had to shed space including Groupon who is reducing its physical footprint, which includes subleasing 150,000 square feet of its office space at 600 W. Chicago Ave. Additionally, Toast, Inc. is trying to sublet 50,000 square feet at 515 N. State Street and 70,000 square feet for Uber at the New Post Office development.
Inventory Translates into Opportunity
An increase in inventory creates an upside for tenants looking to move with benefits such as more flexible lease terms, lower cost per square foot, including furniture and data infrastructure, and zero exposure to increases in real estate taxes and operating expenses.
One Chicagoland tenant represented by Bespoke recently saved significant dollars. Read the case study here.
Demand forecasts do not show a rebound heading into 2021, and we expect heavily discounted excess space will linger on the market longer. However, businesses and employers that rely on office space to foster collaboration, efficiency, and workplace culture have been moving forward with strategic plans to take advantage of the opportunities that exist. That buffer is bolstered by studies that show that trust and creativity suffer among team members who lack face-to-face interaction and further amplified by business owners who are ready to get back to work and re-energize their teams.