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Discount for sublease space moves lower after rising for several years in Manhattan

​​After a consistent rise since 2009, the sublease-to-direct discount decreased by four percentage points in 2016, the result of more high-quality sublease space coming to the market.

As of year-end 2016, Midtown South had the lowest discount to direct at 17 percent, while Midtown saw the greatest discount difference of 25 percent.

Intuitively, the sublease-to-direct discount would be expected to shrink as availability declines; however, the opposite can be seen from 2009-2015. One possible explanation is the tightening in the market having a greater effect on direct rents than on sublease rents- in the last five years, direct rents have increased by 27 percent, while sublease rents have only increased by 13 percent. ​

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