U.S. Office Sublease Availability Nearly Doubles Since Pandemic

Office sublease space has nearly doubled in the U.S. since the COVID pandemic began in Q1 2020 and ushered in hybrid working arrangements.

Figure 1: U.S. Office Sublease Availability

Source: CBRE Econometric Advisors, Q1 2023.

The 189 million sq. ft. of sublease space in Q1 2023 accounts for 19% of total office availability, up from 96 million sq. ft. or 13% of total office availability in Q1 2020. About half of this sublease space is reported as vacant, contributing to the overall office vacancy rate of 17.8% as of Q1 2023. If the remaining 86.4 million sq. ft. of sublease space that is currently reported as occupied were to become vacant, the overall vacancy rate would rise by another 2 percentage points.

The amount of sublease space varies by industry depending on its general return-to-office trend. Technology companies account for 23% of all sublease availability, followed by finance & insurance and business & professional services firms each with a 15% share. All other industry sectors each account for 9% or less.

Figure 2: U.S. Office Sublease Availability by Industry

*Other includes Leisure & Hospitality, Government & Non-Profits and Aerospace/Defense, and Unknown Tenants
Source: CBRE Research, February 2023

Small spaces comprise the greatest number of sublease availabilities as occupiers trim and optimize their portfolios. Nearly 40% of sublease space blocks are between 10,000 and 20,000 sq. ft. and nearly 80% are under 50,000 sq. ft. While fewer in number, large blocks of 100,000 sq. ft. or more are significant contributors to overall sublease availability and total 55.7 million sq. ft., the greatest square footage amount of all size segments.

Figure 3: Share of Sublease Availabilities by Size

Source: CBRE Research, February 2023.
Note: Percentages represent each size interval’s share by total sublease available sq. ft. Data labels indicate the number of sublease availabilities in each size range.

Although subleasing activity totaled 28.2 million sq. ft. in 2022, it did not outpace the amount of new sublease space added to the market. Sublease availabilities are expected to grow further this year.

Figure 4: Sublease Availability vs. Sublease Leasing Activity

Source: CBRE Research, February 2023, CBRE Econometric Advisors, Q1 2023.
Note: Subleasing activity consists of deals over 10,000 sq. ft.

Markets with the most sublease availability include Manhattan Chicago and Washington D.C. Technology and finance & insurance occupiers, two of the sectors most active in adding sublease space, are among the largest tenants in these markets.

Figure 5: Sublease Availability by Market

Source: CBRE Research, February 2023. Top 20 U.S. markets by total office inventory.

Rising office sublease availability continues to challenge market dynamics for landlords but presents more opportunities for tenants searching for space. Sublease space is typically marketed with a rental rate discount of between 20% and 40%, depending on the market, class and remaining term. Longer-term spaces are more likely to attract a tenant; approximately 47% of sublease availabilties have five years or more remaining.¹

Office landlords with direct space offerings will face more competition as occupiers continue to optimize their portfolios and add discounted and fully built-out sublease space to the market.

¹ Based on subleases with known lease expiration.