Office sublease space is the current hot topic. As is the concept of simply working in an office. We are all getting mixed messages on office space use from the media and our own colleagues. “The office market is dead.” “It’s coming back with a vengeance.” “It will never be the same.” “Work from home doesn’t work.” “The market will crash.” “We’ve already hit bottom.”
People hate eating their same homemade sandwich all the time. We hear all this and more every day. We call it “the sandstorm.” The sandstorm of sublease space will continue, and no one knows what’s going to happen next.
In the meantime, commercial real estate pros can continue to analyze and report statistics since the pandemic began and help clients interpret what it all means for their specific business.
It’s important to remember Metro Phoenix is a 106 million-square-foot market. Sublease space did double in 2020, but that only resulted in an additional 1.2% of vacancy for the year, according to data from Lee & Associates Research.
One would have thought that for a year plagued by nine months of a pandemic, more than just 1.2% of inventory would have been put on the market for sublease. Furthermore, in Q4 2020, the rate of sublease space added was much smaller (87,000 square feet added) than in Q2 (646,000 square feet) and Q3 (438,000 square feet). Headed into the new year, this downward pace of additional sublease inventory added, coupled with the vaccine, suggested vacancy and supply would not spike up in 2021.
Then Q1 2021 hit, and 1.03 million square feet of sublease space hit the market in just 90 days. In addition, 550,000 square feet of office space was dumped onto the market with companies downsizing or simply giving up all of their space. Currently in Q2, the sublease volatility continues.