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NAI Partners Sublease Index decreases to 14.5%
The NAI Partners Sublease Index—measured by the amount of sublease space as a percentage of total available space—decreased 70 basis points to 14.5% in August.
While sublease space accounting for 14.5% of all available space remains an inflated figure—particularly in the context of sublease space historically averaging 3.5 million sq. ft.—Houston’s overall sublease market has actually experienced a steady decline since the third quarter of 2016, when available sublease space reached its peak of 12.2 million sq. ft. Space currently being marketed for sublease represents 8,955,650 sq. ft., compared to this time last month at 9,392,340 sq. ft., a decrease of about 437,000 sq. ft.
Unfortunately, the primary driver of this decline was not a sublessee, but rather lease expirations that reverted the space back to the landlord. And so while sublease availabilities may have declined, the overall vacancy rate in Houston increased to 21.9% as of the end of August, compared to 21.7% for Q2 2018.
Additionally, it’s worth noting that future drops in the Sublease Index are likely to be mostly due to the fact that around 40.0% of the available sublease space is set to expire in the next 24 months, and less attributable to sublessees, as space with less than 24 months doesn’t have enough term to be highly marketable.
With all that said, a portion of the recent decline did indeed come from a significant sublease signing, with Constellation/Exelon subleasing 103,356 sq. ft. from Kinder Morgan at 1001 Louisiana St. in Houston’s CBD—the most sizable sublease deal recorded during August.
Director of Research
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