11.9m s/f and growing: sublease stats starting upward trend.

Manhattan's overall sublease space has increased rapidly, to 11.9 million square feet, or 29% of the market's availabilities, primarily resulting from layoffs in the financial sector, according to "Manhattan Sublease Space: Rapidly Rising Tide," a new white paper from CBRE Research.

Though considerably higher than the 7.2 msf, or 22% of availabilities, in July 2008, the current sublease level is still far below the high-water mark of 14.8 msf, or 44 percent, that followed the combined effects of the dot-com bust and September 11, 2001.

However, the current recession and continued New York City layoffs in 2009 --projected to be as high as 125,000 by year's end--will increase the overall Manhattan office availability rate and likely push rents down further, spurring landlords to be more aggressive with pricing.

In fact, as sublease space Continues to come on the market, many tenants are targeting occupant-ready, built-out space, particularly high-end space, which may now be available at discounted rates. Although, the lack of new office development in Manhattan limits supply, and should help temper price drops.

The overall Manhattan average sublease rent is $63.30 per square foot, an 8% discount on the average Manhattan direct rent of $68.46 psf. The greatest disparity is in Midtown, where direct rents average $81.82 psf, while sublease space averages $71.12 psf, a 13-percent discount.

The increase in sublease space will continue to close the gap in rents between sublease and direct space.