Soaring sublease trend may lead to rent decline.(knowitall)(Brief article)

Landlords across the nation are competing for tenants, not only with other property owners, hut also with ten ants offering space at exceptional rates for subleases. While the amount of subleases available today isn't cause for concern just yet, researchers say it is a growing trend signaling softening fundamentals and declining rental rates ahead.

In the 12 months ended at midyear 2008, tenants added 13 million square feet of offices to the inventory available for subleases nationwide, a gain of 18 percent, according to Grubb & Ellis. Negative absorption measured 3.25 million square feet in the second quarter of 2008, reversing a five-year trend of positive absorption, according to the author of a national sublease report published by Grubb & Ellis in September. Negative absorption reflects tenant contraction, or users giving space back to the landlord as old leases expire rather than renewing their leases or leasing larger space.

Based on previous cycles, commercial real estate experts say declining rents are just around the corner. Asking rents will begin to decline in the fourth quarter and will bottom out around the middle of 2010, according to projections by Boston-based Property & Portfolio Research.

Print Get the Mag Weekly Updates