Subleases are the Holy Grail for any firm looking to move up in the world. Often, subleases allow a company to secure better offices for below market rents — sometimes fully furnished — while the original company gets inflowing cash as it is outgoing.
During the pandemic, millions of square feet were quickly added to the market as companies worried the sky was falling and workers would never again leave their couches.
Instead, after taking a deep breath and booster shots, employers reassessed their needs and decided to reoccupy either some or all of their space.
One of the city’s largest sublease opportunities of the year comes from the Japanese ad firm Dentsu.
They had 324,000 square feet inside Morgan North at 341 Ninth Ave. by Hudson Yards but never occupied it.
Now, it may soon be absorbed by KKR, according to anonymous sources.
They say the financial company is negotiating to not only take that space, but also the remaining 310,000 square feet at the Tishman Speyer project, which is topped by a 2-acre roof park and expected to open soon as it’s ready for tenant fit-outs.
Dentsu is also trying to get out of its 112,328 square feet at 150 E. 42nd St.
They are not alone. According to Transwestern, there are 21.4 million square feet of subleases available now in Manhattan with 53 of those over 100,000 square feet and another 100 over 50,000 square feet.
Incoming tenants are often gifted all the furnishings and fixtures which can get them up and running in a hurry — especially as supply chain woes continue.
Brandon Charnas, co-founder of Current Real Estate Advisors, noted that it took a year for one of his clients to get moved into a 20,000-square-foot space simply because they couldn’t get their furniture.
He and co-founder Adam Henick are now offering a 50,000-square-foot sublease of the Lab’s space in Dumbo at 175 Pearl St. that is fully built out.
“It is unbelievable space,” he said, with an asking rent in the $60s per foot. The brokers marketing the space are also seeking 100,000 square feet with yet another client.
Meanwhile, Peloton is still trying to sublease a third of its 312,000 square feet at Hudson Commons at 441 Ninth Ave. A Newmark brochure says the interconnected fourth and fifth floors are fully furnished and wired on a lease through 2035.
According to Colliers, the amount of sublease space is up by 66% from March 2020 when the pandemic started.
“It has tightened, but has a ways to go,” said Michael Cohen, president of Colliers tri-state region, as the amount of sublease space had dipped slightly in August.
“You still have major tenants putting space on the market and for all of them, construction costs will play a significant role,” said Gabe Marans of Savills, a company that only represents tenants.
Marans says companies must weigh remaining in their own, sometimes 10-year-old offices, building out new space at a cost of $400 per foot, or take someone else’s space through a cheaper sublease and save $300 per foot.
“One consideration is both the cost and the time required to build and, therefore, it prioritizes space already built as a quality sublease or where the landlord has pre-builts,” Marans said.
Additionally, Marans warned that although most building owners can build the majority of spaces faster and cheaper than the tenants, construction is still taking up to twice as long compared to the time before supply chains went haywire.
Ex-Brit turned Manhattan resident since 2008.