All this sublease space (the highest in a decade) isn’t the apocalyptic sign you might think. NAI Partners’ Nat Holland says sublease availability can increase under both weakening and strengthening markets and isn’t a good predictor of asking rents or overall fundamentals. In fact, sublease space increased in 2009 as tenants contracted, but it also increased from 2012 to 2014 as we recovered.
The last time sublease space rose, so did rents. But that probably won’t be the case here—Nat estimates that 65% of total sublease vacancies (which account for 13% of total Class-A and -B availabilities today) are related to the energy sector. That suggests a strong effect of the decline in oil prices, and an overall weakening.
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