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Over the years, that excess supply of space has contributed to negative absorption and has weighed down the positive absorption that has occurred. Companies have given back space at the end of lease terms, subleased excess space at discounted rates or just sat on that empty shadow space, slowly backfilling it with their own internal growth. An added effect is that those tenants that were stuck paying for unused space during the downturn are now much more cautious in committing to real estate expansion even as job growth has returned.
- Manhattan at 3.8 million SF
- Washington, D.C. at 2.9 million SF
- Dallas/Fort Worth at 2.1 million SF
Meanwhile, other markets have seen a marked improvement in available sublease space. In Minneapolis-St. Paul, for example, available sublease space ticked higher along with some recent corporate reshuffling. However, the volume is once again starting to decline. Sublease space dipped 50,000 SF just in the past six months to hover at about 920,000 SF, which represents about 1.3% of the total multi-tenant office market, according to the Minneapolis office of Cushman & Wakefield.
There is always a bit of natural ebb and flow to sublease space as companies continue to reposition. Overall, the market does seem to be moving in the right direction, and many in the industry are hopeful that shedding that surplus office space will be akin to cutting the lines that have kept the office recovery tethered. There is more optimism among building owners and investors that less shadow and sublease space could give the office market more traction in its recovery. That traction, along with continued job growth could translate into stronger fundamentals with positive absorption, improving vacancies and more pressure on rent growth ahead.