JPMorgan Chase & Co., Salesforce. com Inc. and PricewaterhouseCoopers are among the larger companies looking to offload large office blocks, the latest sign that remote working is hurting demand for this mainstay of commercial real estate.
Large companies typically sign office leases for a decade or more, giving them few options to reduce their footprint beyond trying to sublet floors to other tenants. At the end of 2020, 137 million square feet of office space was available to sublet across the United States, according to CBRE Group Inc., a 40% increase from the previous year and the highest figure since 2003.
As sublet space increases with each recession, as struggling businesses look to cut costs, businesses typically add office space when the economy picks up. But this time around, many companies that are abandoning real estate are doing well financially; they say they need less space because they anticipate more employees will at least work part-time from home even after the pandemic is over.
This suggests that the demand for office space may be permanently lower in some businesses, just as the rise of e-commerce has driven down demand and street level retail rents.
This wave of sublet activity is already causing new headaches for landlords. Office rents for more expensive spaces, including concessions, have fallen by about 17% over the past year in New York and San Francisco and 13% nationally, according to the real estate company. JLL.