JPMorgan Chase & Co., Salesforce . com Inc. and PricewaterhouseCoopers are among the major firms looking to unload big blocks of office space, the latest sign that remote work is hurting demand for this pillar of commercial real estate.
Large companies typically sign office leases for a decade or longer, giving them few options for reducing their footprint beyond trying to sublease floors to other tenants. At the end of 2020, 137 million square feet of office space was available for sublease across the U.S., according to CBRE Group Inc. That is up 40% from a year earlier and the highest figure since 2003.
While sublet space increases during every recession as struggling businesses look to cut costs, firms typically add office space when the economy picks up again. But this time many of the companies ditching real estate are doing well financially; they say they need less space because they plan for more employees to work at least part time from home even after the pandemic is over.
That raises the prospect that demand for office space could be permanently lower at some companies, much like the rise of e-commerce has been driving down demand and rents for street-level retail.
This flurry of subleasing activity is already causing fresh headaches for landlords. Office rents for more expensive space, including concessions, fell around 17% over the past year in New York and San Francisco and 13% nationwide, according to real-estate firm JLL.