Nassau County shows 32% increase in leasing

Real Estate Weekly, Oct 9, 2002 by Fred C. Trump, III

The Long Island real estate market at midyear was stable reflecting a 14% increase in leasing velocity. While there were few major deals and even some companies expanding, Class B transactions clearly fueled the activity. In light of the In Nassau economy, the 14% rise depicts a positive dynamic.

The strength of Long Island's office market reflects the resiliency and diversity of our economy, I believe. Overall the Long Island office market remains remarkably stable, especially when compared with the volatility nearby in New York City, Northern New Jersey, Westchester and Connecticut. There was marked improvement in the fundamentals over the first half of 2001. Leasing activity in fact accelerated and positive net absorption trends were reported for three consecutive quarters. The availability rate at midyear registered 10.7%, down from 11% last June.

In Nassau County, with its larger and older inventory and tighter office market, reported an availability rate of 8% at midyear, down from 8% last June; it was the third consecutive drop for this key measurement. (Suffolk County, by comparison, had an availability rate of 15%, up from 14.4% last June offering many of the larger blocks of contiguous space.)

A strong second quarter, in which 371,000 SF of office space was leased, propelled Nassau County's first-half leasing activity to 637,000 SF, ahead of last year's rate by nearly one third. Nassau's positive first-half performance also reflected an improvement in several categories, including net absorption, availability and a reduction of quality sublease offering. County wide, net absorption was positive 186,000 SF, a sharp reversal from last year's first half, which totaled negative 174,000 SF. The activity was in Central Nassau, where net absorption swung from negative 142,000 SF in the first half of 2001 to positive 188,000 SF in first half of 2002.

It might be tempting to conclude from the numbers that the business community is edging west towards New York City, but this is not the case. A close look reveals that much of the activity occurred in the Class B properties on the market price wise, including a good deal of opportunistic leasing by companies prepared to grab space at relatively low prices and trust the healthy sublease market would forgive excessive optimism. (Given Nassau's 28% sublease rate, they are probably right.)

Meanwhile, Class A activity in Nassau slowed in the first half, while Class B space soared 142% on 380,000 SF of activity. Geographically, the action was in Central and Eastern Nassau with the two biggest leases of 2002 being in Eastern Nassau in the form of deals for two Woodbury companies - 65,000 SF to Titleserve and 62,000 SF to Cardholder Management.

For all that, the two biggest lease transactions were in Suffolk with the Western submarket reporting a 25% increase. Both were in Melville, the epicenter of corporate activity for the region. AutoOne took 84,000 SF on Old Country Road, and Zurich American Insurance rented 80,000 SF off the Long Island Expressway. While the Central Suffolk County office market softened, leasing activity totaled 442,000 SF, yet the first phase of a 183,000 SF speculative project opened in Hauppauge in June to become the top block of Class A space on the market. The recap: steady demand and limited new supply contributed to the stability of the office market. Given the turbulence of the economy lately, the first half of 2002 was positive.