Navigating Manhattan’s Rising Industrial Sublet Market in 2024
Manhattan’s industrial real estate market has reached a historic milestone in 2024, as sublet space availability continues to climb, setting a new record. With 7.7 million square feet of industrial space currently available for sublet, the market has surged 165% since the second half of 2022, eclipsing the previous high of 7.5 million square feet during the Great Recession of 2009. This trend underscores a shifting landscape for office space tenants, particularly those navigating the complexities of the sublet market.
Industrial Sublets: A Growing Trend
The increase in available industrial sublet space reflects ongoing changes as businesses right-size their operations post-pandemic. The rapid growth in sublet availability since mid-2022 can be attributed to companies adjusting their previous expansion plans, leading to an influx of space back into the market. This trend has been particularly pronounced since the end of the second quarter of 2024, with nearly 1 million square feet added in just a few months.
While tenant demand across New York remains steady, the sheer volume of available options—82 million square feet of industrial space—means that sublets are just one of many choices for businesses. Notably, much of the current inventory is new, with almost 30 million square feet of industrial space added since early 2022. This new, high-quality inventory has become the preferred choice for many tenants, further complicating the sublet landscape.
Balancing Supply and Demand
Despite the surge in sublet availability, New York’s overall industrial availability rate has started to stabilize, dropping to 9.1% at the start of September 2024. This slight decline from the recent high of 9.2% was driven primarily by a reduction in direct lease availability. After peaking at 76 million square feet at the end of Q2, direct lease availability has decreased to 74.6 million square feet, signaling the market’s first signs of tightening since the second quarter of 2021.
One contributing factor to this shift is a slowdown in new industrial construction. While more than 50 million square feet of projects broke ground between 2020 and 2023, only 3 million square feet have begun construction this year. This slowdown, coupled with steady leasing activity, has helped curb the pace of rising availability and could indicate a more balanced market going forward.
What Tenants Need to Know
For office space tenants in Manhattan, the expanding sublet market presents both opportunities and challenges. While sublet spaces can offer cost savings and flexibility, the sheer volume of options means that tenants must carefully assess their needs against a backdrop of fluctuating demand and supply. As the market continues to evolve, staying informed and agile will be essential for businesses looking to secure the right space in New York’s ever-competitive industrial landscape.
Tenants seeking sublets should act swiftly, as the market’s dynamics could shift with continued economic changes. Whether opting for direct leases in newly developed properties or exploring the sublet market, strategic decision-making will be key to navigating Manhattan’s complex industrial real estate environment in 2024.
