For the past several years, leading office occupiers have shown a clear preference for leasing space directly from landlords, especially in highly rated buildings. This may not necessarily continue in the year ahead, according to the latest data.
The recent leasing behavior of office tenants in the occupancy market reveals two notable developments. First, sublet listings have garnered a steadily increasing share of leasing activity in the highest-quality buildings, rated four- and five stars, over the past few quarters, with the level approaching the upper end of its pre-pandemic range. Second, the share of availability in these highly rated buildings that is sublet appears to have reached its peak. While neither movement has been large, together they suggest a change in momentum that could carry forward into next year.
The decreasing amount of high-quality direct space for lease appears to be the biggest single factor in this subtle shift in tenant behavior. As has been much-discussed in recent months, the office development pipeline has shrunk dramatically, with new construction at multi-year lows and only a handful of premium buildings coming online. This has led to a tightening of direct availability in the most desirable properties, particularly for tenants seeking large blocks of space.
As it becomes increasingly difficult for office tenants to secure premium space directly from landlords, subletting space in high-quality, well-located buildings is emerging as an attractive alternative.
While they may have less flexibility on lease term and could also miss out on the kind of generous landlord-provided allowances for bespoke buildouts that have become common in the market, sublet space in highly rated buildings in amenitized locations can still be found —at least for now.
There are still nearly 100 million square feet of office space available under a sublease in the U.S. More than 60% of this is in buildings rated four and five stars, which, in most markets, are typically considered Class A. However, both the absolute and relative amounts of this Class A sublet availability have peaked, an early indicator that tenants have already begun to turn to sublet space to meet their occupancy needs.
This increasing consideration for sublet space could have several implications for the office market in 2026. For landlords still trying to fill unleased space, it may mean greater competition from sublet offerings, pressuring their ability to hold rents high. For tenants, a willingness to accept sublet space could mean they do not have to sacrifice either building quality or prime location.
Of course, there are reasons why sublet leasing activity may not pick up. If job growth slows further, overall office demand is likely to lessen as well. Some tenants may then abandon expansion plans, or even opt to vacate space, increasing both direct and sublet availability.
Many landlords, too, could decide to work with existing tenants who have sublet listings in their buildings, offering to cancel the remaining term and essentially take over the listings, marketing them directly.
If the base case holds, however, the likelihood is that sublet space will become a more attractive option for office tenants in 2026 than it has been for several years.