The New York Times published a new article titled "Manhattan Office Sublets Show Benefit as Markets Tighten" examining the current trend in NYC. Data from Newmark Knight Frank shows that, as of April, Downtown reflected a 40% drop in sublease space with Midtown down 35%. An excerpt from the article:
Conventional wisdom holds that subleasing — in which tenants vacate their offices before the end of their lease and rent it to another tenant at a discount — has a negative impact on the market. Landlords must compete against the lower rents, while tenants bristle at the restrictive terms that often are a part of a sublease.
But the industry perspective is now shifting. Tenants are embracing subleases as a means of locking in below-market rents, while landlords, who are facing fewer vacancies, are using it to attract tenants and then converting the leases into direct deals when the subleases expire.
"Landlords don’t usually like the fact that sublease space rents for less, and tenants don’t like that the leases offer little flexibility," said Moshe Sukenik, an executive vice president and principal at Newmark Knight Frank. "But there is a silver lining that can result in a win-win for everyone involved."
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