Subletting properties has become very popular recently. A sublet is the leasing of a property to someone other than the main tenant. Also known as subleases, these are very popular in college areas with students who need to fill their apartment during a semester when they will not be in the area. Subletting allows someone who will not be using the property for a certain amount of time to lease it out to another tenant who will then make rent payments, though the lease is still officially in the original owner’s name.
Data from CoStar Group
These graphs both show that, for the most part, sublet vacancies have been decreasing since around the time of the 2008 financial crisis, with a few exceptions every now and then. However, recently both retail and office spaces have had an increase in vacancies. Though small (less than 1% in the past few years), the increase is still there. For retail, the vacancy rates begin to increase around 2017, meaning less people are subletting their properties. However, office sublet vacancy rates do not appear to increase until the beginning of 2020, around when the pandemic began.
It’s hard to say for sure whether the pandemic caused this increase in vacancies for office space and the continued increase in vacancies in retail space. As with the other metrics analyzed during the past few months, it is important to keep an eye on these numbers to see the full affect Coronavirus will have. Because it has only been about four months since the economy really started to shut down, it’s too soon to make a definitive statement about the pandemic’s impact. Real estate tends to have a delay from when an event occurs to when the impact is actually felt. It is important to continue watching these numbers to know for sure how subletting is affected by Coronavirus and the subsequent lock downs.