Greater Philadelphia’s sublease vacancy has risen slower than most markets
A survey of major markets reveals a 1.7% average increase in sublease vacancy in the last year
March 29, 2021
Sublease vacancy (%)
- Compared to a dozen major markets, Philadelphia’s sublease vacancy rate – and the speed with which it is increasing – is modest. In the first quarter of 2020, before any COVID-related impacts had begun to affect market conditions, vacant sublease space represented 0.8% of total inventory. One year later, sublease vacancy has expanded to 1.8% of total inventory (approximately 2.5 million square feet in a regional supply of nearly 139 million square feet of Class A & B office space).
- Across these major markets, the dynamic West Coast gateway markets of San Francisco and Seattle saw, by far, the largest surges, with sublease vacancy rates now standing at 7.1% and 5.0%, respectively. Only three other markets have a sublease vacancy rate above 3 percent: Pittsburgh, Austin, and New York City. The average one-year increase across markets was 170 basis points. Only Atlanta, Houston, DC, and LA are starting 2021 with lower sublease vacancy rates than Philadelphia.
- Workplace re-entry strategies will have a major impact on the degree to which sublease vacancy increases further in 2021. Tenants that opt to downsize or abandon office space entirely may produce a wave of subleases rolling over to become direct space. At the other end of the spectrum, sublease deals may move faster in industries where tenants are seeking to re-occupy space at discounted rates as they navigate the uncertainties of the recovery.