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Sublease asking rents for Class-A buildings are the farthest they've been from direct asking rents in 17 years. The difference: $8.52/SF for Class-A and $4.29 for Class-B, according to new research by NAI Partners.
There are a few reasons why the gap has widened. First, landlords representing direct space rarely advertise asking rents that are at the bottom of the range they are willing to accept. Thus, gross and base (NNN) asking rents for direct space have an upward trend, with little change during down markets.
In contrast, sublease asking rents reflect shifts in market conditions, for both gross and base sublease asking rates and both Class-A and Class-B buildings.
This is not surprising given that tenants putting their office space up for sublease are likely more forthcoming in their asking rates given their motivation to diminish their financial obligations with the lease. Nevertheless, gross sublease asking rents tend to be slightly less revealing of actual market conditions than NNN asking rents, and the latter segment fluctuates more.
NAI also reports that Class-B market rents have not softened nearly as much as Class A-market rents. Overall, Houston’s Class-B market is helping to stabilize the more dramatic downturn in higher-tier buildings.
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