Savills' survey found 82% of technology companies will likely lease less space than planned, and 55% anticipate disposing of existing space.
Technology companies across the country expect to need less office space in the coming years, a sign of falling demand in the commercial real estate market.
Tenant representation firm Savills released a survey Thursday of 250 technology companies that found 82% anticipate needing less office space over the next 12 to 18 months, and 55% plan to dispose of existing space over that time period.
This disposal of space is already happening in a big way, with a wave of sublease listings hitting the market, Savills Executive Managing Director Zev Holzman said.
"Every day there is new sublease space hitting the market from tech companies of all sizes," Holzman said. "We're seeing a very steady flow of new subleases hitting the market."
Holzman said many of the sublease listings are between 10K SF and 20K SF, but one much larger space hit the market in the D.C. area last week. After signing a full-building, 162K SF lease in Herndon in April, Walmart Labs decided to keep its workers remote and instead put the entire space on the sublease market.
In New York City, Zillow placed more than 150K SF on the sublease market in the third quarter, according to Savills, and Yelp placed a 58K SF office on Fifth Avenue on the sublease market. Among all sublease space put on the market since the coronavirus pandemic began in Manhattan, more than 44% has come from tech companies, according to Savills.
These subleases increase the overall availability of office space on the market and will likely lead to a drop in rents, Holzman said. While building owners seek to maximize income with their leases, tenants looking to sublease space are under more pressure to do a deal quickly than hold out for a higher price.
"A subtenant who is simply looking to mitigate that expense is going to make a more aggressive deal than a landlord trying to maximize asset value," Holzman said. "As sublet inventory becomes a greater percent of overall availability, that puts pressure on direct rents."