After settling in at approximately 130 million square feet (msf) for the past year, available North American sublease inventory increased in Q2 2022. Underlying the increase is market-level volatility—nearly a third of markets had quarter-over-quarter (QoQ) declines or no change from Q1, while sublease space increased by over 300,000 sf in 11 markets. At 139 msf, available sublease space is up 6.1% QoQ.
Despite overall sublease inventory growing across North America, inventory declined QoQ in over a fourth of tracked markets (24 of 91). While some markets experienced increases QoQ, as of Q2 2022 sublease availabilities are down year-over-year (YoY) in 31 markets, with significant drops in many of them.
The quarterly increase in vacant sublease space across some North American markets obscures the positive overall performance of those markets. Analyzing the sublease inventory of these markets over the last ten quarters of the pandemic shows that, although there have been quarterly increases, overall inventory is currently lower than their pandemic high.
For example, while Toronto, San Francisco and Midtown South Manhattan continue to have elevated availabilities, sublease inventory in all three markets is below recent highs by 700,000+ sf each. Some markets are relatively close to their lows, including San Mateo, San Diego and Brooklyn, New York, and Washington, DC, where sublease inventory has been declining steadily throughout the pandemic.
These markets have shed more sublease space since they hit their highs and in some cases are near or at their pre-pandemic lows. High quality, built-out vacant sublease space with shorter terms is being leased relatively quickly in these markets.
Outperformance is evident in several markets that have experienced several quarters of decreasing vacant sublease inventory. Some of these markets are close to their lows including Charleston, Puget Sound and Las Vegas. Markets where current sublease inventory is at its low and below the pre-pandemic levels include Northern Virginia, Detroit and Charleston.
Markets on the Mend: Markets with QoQ and YOY Decreases