Sublease space skyrockets

By Mike Sunnucks | Rose Law Group Reporter

The amount of office space available for sublease increased significantly in the second quarter as commercial real estate markets navigated COVID-19 and its various impacts.

The amount of sublease space on the market in metro Phoenix totals 2.01 million square feet in the second quarter, according to Lee & Associates Commercial Real Estate Services.

That compares to 1.36 million square feet of sublease space available in the Phoenix region at the end of the first quarter.

Tenants are holding off on expansions and in other cases are contracting office operations either by having employees work from home because of COVID-19. The reality is existing tenants need less office space and there are not as many new tenants looking for offices.

“Sublease space increased dramatically, but it’s not at an all-time high,” said Andrew Cheney, a principal with Lee.

Cheney points out the amount of sublease space regionally went from 1.36 million square feet to 2 million square feet in 90 days. “But it is still less than the high of 2.5 million square feet in 2017,” Cheney said

Some other office market indicators did not make major moves. The office vacancy rate is 15.8 percent down from 16.2 percent in the first quarter.
There was 599,629 square feet of absorption in the second quarter compared to 251,884 square feet of absorption (net leasing during the first quarter), according to Lee’s numbers.

Asking office rents in metro Phoenix ended the second quarter at $25.78 per square foot flat from the Q1when rents were $25.74 per foot.

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