BOSTON- Recent research by CBRE reveals that sublease space in downtown Boston is abating in 2021. Sublease space flooded the downtown Boston office market in mid-2020 at the height of Covid-19 restrictions in Massachusetts. Prior to the pandemic, the office market downtown averaged 1.2 million sq. ft. of sublease space in 2018 and 2019. At the end of 2020, sublease space had tripled, peaking at 3.6 million sq. ft. with over 50% concentrated in the Central Business District. Since the beginning of 2021, sublease space has started to recover, ending the month of July at 3.2 million sq. ft.
The decrease in sublease space is due to a few factors, including sublease space expiring and going direct, sublease space being leased, and tenants deciding to pull their sublease space off the market with plans to reoccupy once they return to the office. Through the first seven months of this year, over 500,000 sq. ft. of sublease space has been removed due to leases being signed and at least another 200,000 sq. ft. has been withdrawn by tenants to reoccupy.
As leasing and spaces being pulled back have accelerated since the beginning of the year, the flow of sublease space coming onto the submarket has slowed. The monthly average of new space in 2021 is 57% lower than the monthly average in the second half of 2020.
Tenants are returning to the downtown market with more than 4.1 million sq. ft. of active demand and an additional 478,000 sq. ft. on hold for space needed by the end 2024. Increased tours and commitments are the new norm for sublease space across the city. Tenants in the market are paying attention to the less expensive, high quality sublease space on the market, as direct asking rents have not seen a sharp decrease since the pandemic struck.
As companies are continuing to plan for their post Labor Day return to the office and a possible delay due to the Delta variant we are closely monitoring any effect on the sublease market and the overall recovery of the Boston market.