Atlanta Sublease Availabilities-The Canary in the Coal Mine
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A Blank Canvas
Whenever bad news happens in the world, one of the canaries in the coal mine for real estate is the availability of subleases. So, I’ve been getting a fair number of questions about activity in this area.
The crack research team at Cushman & Wakefield Atlanta, lead by Christa DiLalo and assisted by Riley McMullan, swung into action to find answers.
The report card says subleases are up significantly and going to continue to rise. Available sublease space in Metro Atlanta has increased 15% since Q1 20, and 46% since Q1 19. Sublease availabilities are currently at their highest point in this economic cycle. And it is widely assumed that Macy’s will put 90.000 s.f additional on the market after they announced they will not open their Midtown tech center.
The ratio of sublease availability to total vacancy continues to rise, with sublet space now accounting for 6.5% of the total in Metro Atlanta. In Q1, the sublease share of total vacant space grew for the fourth consecutive quarter, and Q2 is on track to see similar gains.
Since the beginning of March, 37 new sublease listings have hit the market in Metro Atlanta. Large availabilities added in April include Merchant e-Solutions’ full floor in Buckhead, and nearly 20,000 sf listed by Asbury Automotive Group in Georgia 400. Additional sublease space is expected across Metro Atlanta in the upcoming weeks and months.
But there are some qualifications to the doom and gloom. 57% of current sublease vacancies are under 10,000 s.f.. Only five currently available spaces are greater than 50,000 and they comprise only 16% of the total vacant subleases being marketed.
Oh, and many of the largest sublease offerings in Metro Atlanta do not have significant term remaining. These options were clearly made available pre-Covid.
One thing to watch: Coworking operators currently lease nearly 2.2 MSF across Metro Atlanta, comprising 1.5% of total inventory and 5.1% of the Midtown Class A inventory. While I do not have visibility into the vacancy rates within these spaces, it is important to understand potential shadow vacancy within coworking spaces. Coworking listings do not factor into Cushman & Wakefield statistics but the research team will continue to monitor for shifting trends in this space type in addition to traditional sublease space marketed by corporate users
So, yes subleases are up and co working space is at risk in some quarters as well. But just like bread in the bakery, subleases burn off at expiration. At this point, the pace of new subleases in a large market like Atlanta is a trickle, not a stream.
But we better keep our waterproof boots at the ready.
