Intelligent Investment

Industrial Sublease Space Availability on the Rise

June 22, 2023 2 Minute Read

Available U.S. industrial sublease space has more than doubled from a year ago to 137 million sq. ft. but still represents less than 1% of the nation’s total industrial inventory. A corresponding spike in sublease transaction volume totaling 20.2 million sq. ft. year-to-date through May 31 has also occurred, up from 12.4 million sq. ft. over the same period last year.

The rise in sublease availability, up by 30% alone between April 1 and June 9, is attributable to several factors. These include overestimates of product inventory needs, economic uncertainty, retailer store closings and record-high rents.

Taking rents have grown by nearly 67% over the past three years. This makes subleasing an enticing option for many occupiers, which can often generate enough revenue from subleasing a portion of their facility to pay rent for the entire building.

Figure 1: U.S. Industrial Available Sublease Space

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Note: Includes industrial buildings 10,000 sq. ft. and above. Q2 2023 available space as of 6/9/23.
Source: CBRE Econometric Advisors, CBRE Research, June 2023.

Nearly three-quarters of available sublease blocks of 300,000 sq. ft. or more that account for 38% of total sublease space are in Class A buildings, 37% of which were completed within the past two years or are still under construction. Sublease availability in this size range remains a relatively new trend as 54% of it has been on the market for only 90 days or less.

Figure 2: Time on Market for Available Sublease Blocks of 300,000 Sq. Ft. or More

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Source: CBRE Research, June 2023.

General retailers account for more than 26% of available sublease blocks of 300,000 sq. ft. or more, followed by general wholesalers at nearly 24% and e-commerce-only occupiers at nearly 18%. The Inland Empire, with a total of 6.9 million sq. ft., led all markets for available sublease blocks of 300,000 sq. ft. or more.

Figure 3: Share of Available Sublease Blocks of 300,000 Sq. Ft. or More by Sublessor Industry

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Source: CBRE Research, June 2023.

Figure 4: Top Markets for Available Sublease Blocks of 300,000 Sq. Ft. or More

Image of U.S. Map and data

Source: CBRE Research, June 2023.

CBRE expects that available sublease space will continue to increase due to economic uncertainty and lower product inventory levels. Demand for such space also is expected to increase due to the opportunity for shorter lease terms with lower-than-market rental rates. As a result, available sublease space is expected to remain less than 1% of total U.S. industrial inventory and will not threaten the market’s 13-year streak of positive net absorption.

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