COVID-19 has left a lot of uncertainty in the office sector of the commercial real estate industry. The long-term implications on the office market are unknown. A combined impact of work-from-home and the downsizing of struggling companies has increased the U.S. office sublease inventory to over 130 million square feet at the end of the second quarter of 2020. To help evaluate the impact, Site Selection Group has identified which metro areas have been impacted the most and compiled a list of companies that are bucking the trend by taking more office space in the midst of the global pandemic.

Metro area with the highest increase of sublease space

Based on data from Costar Group, there is 132.4 million square feet of sublease office space on the market across 206 metro areas. This was an 11.9% or 14.1 million square foot increase over the previous quarter which was prior to the COVID-19 pandemic. San Francisco topped the list with 4.4% of the total office market available for sublease while New York City had the highest amount of square footage for sublease at over 20 million square feet. The following map shows the amount of sublease space on the market across the U.S.

Available Sublease Space by Metro Area

 

Largest new leases signed in Q2 2020

Despite the pandemic, there are still companies signing new leases across the country. Most companies are trying to delay decisions on new leases and lease renewals. Most landlords are very nervous right now; however, it is a great time to negotiate with landlords as the market shifts from a landlord market to a tenant-favored market. Below are some of the largest leases signed in Q2 2020:

Company Square Feet Location
Facebook 740,000 New York, NY
Microsoft 396,740 Reston, VA
Microsoft 388,970 Atlanta, GA
CRISPR Therapeutics 263,500 Boston, MA
Microsoft 246,638 Redmond, WA
Securities Exchange Commission 241,171 New York, NY
JP Morgan Chase 239,672 Houston, TX
TikTok 232,138 New York, NY
Goldman Sachs 227,852 Jersey City, NJ
Costco Wholesale Corp. 224,877 Oklahoma City, OK
AIG Global Investors 217,638 New York, NY
Marelli 195,262 Southfield, MI
Genesco Inc. 180,000 Nashville, TN
Lockheed Martin 166,708 Lone Tree, CO
Walmart Labs 162,357 Herndon, VA
Trinity Industries 155,200 Dallas, TX
Maximus 147,111 Tampa, FL
Western Midstream Partners 133,948 The Woodlands, TX
Amazon 111,368 Redmond, WA
Morgan Stanley Wealth Management 111,100 Miami, FL

 

Conclusions

The office market is going to be in disarray for the next couple of years as the economy recovers. Companies need to consider taking advantage of market conditions as the market shifts from one controlled by landlords to one controlled by tenants. If your company is in a position to make decisions about your future office space needs then now is a great time to negotiate with landlords.

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