SANTA ANA, Calif., Sept. 3 /PRNewswire-FirstCall/ -- Grubb & Ellis
Company (NYSE: GBE), a leading real estate services and investment firm,
found in a special report titled, The National Office Sublease Market: Is
It Really Different This Time?, released today that the current softening
in the sublease market is significantly milder than what occurred during
the same timeframe of the last market contraction.
While space available for sublease increased during the second half of
2007 and the first half of 2008, the report concluded that there are key
differences between current conditions and those of the previous market
contraction in 2001 and 2002.
"The impact of sublease space on the market boils down to how
competitive the space is compared to existing alternatives," said Robert
Bach, Grubb & Ellis' Chief Economist. "Tenants looking to market sublease
space are in a more favorable pricing environment compared to the previous
cycle as overall asking market rental rates have yet to decrease."
According to the report, broad market fundamentals have remained
positive despite the concurrent increase in sublease availability. The
market experienced 24.5 million square feet of positive absorption from the
third quarter of 2007 through June 30, 2008, compared with 38.9 million
square feet of negative absorption in the earlier benchmark period. Overall
Class A asking rents have also continued to increase 7.0 percent, compared
to a 6.3 percent decline in the previous cycle, according to the report.
During the prior contraction, developers reacted to dissolving demand
by tabling new projects. In contrast, during the current softening in the
sublease market developers have continued to kick off new projects as the
construction pipeline passed the 100 million-square-foot mark during the
second quarter of 2008 for the first time since 2001.
An analysis of 363 subleases being actively marketed by Grubb & Ellis
in August 2008 suggests that while smaller blocks of space, less than
10,000 square feet of rentable area, dominate in terms of the number of
offerings at 67 percent of overall market share, these spaces only account
for 24 percent of all sublease availability. Although only 3 percent of
overall market share, large blocks of space, 40,000 square feet and larger,
account for 21 percent of the total sublease square footage available.
The report sheds light on which industries have been able to extract
value from the sublease market; the professional, scientific and technical
services sectors, the transportation and warehousing sector, and the
finance and insurance sectors account for half of the sublease absorption
over the past four quarters.
"While additional sublease space can be expected to become available
over the coming quarters, the majority of it in suburban Class A buildings,
current conditions better position tenants to mitigate their losses than in
the previous softening cycle," said Bach.
The report also includes a summary of trends occurring in key markets
across the nation:
-- The South Florida, Atlanta, Austin, and Central and Northern New
Jersey markets all show evidence of emulating the national trend of an
increase in sublease space in the suburban Class A properties.
-- While Atlanta has mirrored the national market with an increase in
sublease supply of suburban Class A properties, rapid growth in medical and
life sciences industries has served to keep the market in positive
absorption territory as of mid-year.
-- Chicago countered the national trend with the majority of the
increase in sublease space focused in the city's central business district.
Despite the recent jump to 6.4 million square feet of available space, the
market is far from the 12.6 million square feet available during the prior
market contraction.
-- In Los Angeles, the Tri-Cities and LA North submarkets were hard hit
due to the area being home to residential real estate and related firms.
-- Orange County witnessed a 52 percent increase in sublease inventory
during the past year, driven by consolidations and reductions in the
mortgage banking, software, training and legal industries.
-- Large blocks of Class A space account for more than 70 percent of
the total sublease availability in Richmond, Va. Tenants are aggressively
looking to monetize the excess capacity of space in the area.
A complete copy of the report can be requested via email, send requests
to corporatecommunications@grubb-ellis.com.
About Grubb & Ellis
Grubb & Ellis Company (NYSE: GBE) is one of the largest and most
respected commercial real estate services and investment companies. With
more than 130 owned and affiliate offices worldwide, Grubb & Ellis offers
property owners, corporate occupants and investors comprehensive integrated
real estate solutions, including transaction, management, consulting and
investment advisory services supported by proprietary market research and
extensive local market expertise.
Grubb & Ellis and its subsidiaries are leading sponsors of real estate
investment programs that provide individuals and institutions the
opportunity to invest in a broad range of real estate investment vehicles,
including tax- deferred 1031 tenant-in-common (TIC) exchanges, public
non-traded real estate investment trusts (REITs) and real estate investment
funds. As of June 30, 2008, more than $3.6 billion in investor equity has
been raised for these investment programs. The Company and its subsidiaries
currently manage a growing portfolio of more than 218 million square feet
of real estate. In 2007, Grubb & Ellis was selected from among 15,000
vendors as Microsoft Corporation's Vendor of the Year. For more information
regarding Grubb & Ellis Company, please visit http://www.grubb-ellis.com.
SOURCE Grubb & Ellis Company
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CONTACT:
Julia McCartney, +1-714-667-8252,
julia.mccartney@grubb-ellis.com, or Janice McDill,
+1-312-698-6707, janice.mcdill@grubb-ellis.com, both of Grubb &
Ellis Company
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