Report: Long Island office market stable through third quarter

Real Estate Weekly, Dec 11, 2002

Despite a flat economy and the continued fallout from the events of 9/11, the Long Island office market reflected relative stability through the third quarter of 2002, with little change in key indicators from quarter to quarter and year to year. Available space declined by 4% since one year ago, sublease offerings leveled out, leasing activity slightly increased, and net absorption was positive.

"Despite the continuation of negative pressures, the Long Island market continues to hold its own," said Fred Trump III, executive director of Insignia/ ESG's Long Island office. "With the impact of recent world events felt by businesses big and small, the strength of our market, and of New York in general, is further exemplified by these telling statistics."

The availability rate for Long Island remained within equilibrium at 10.6%, slightly decreasing from 10.7% in the prior quarter, and moderately improving from 11.2% a year ago. Class "A" availability declined by 9%, while class "B" availability increased 2% since last September. Nassau County's availability rate was below equilibrium at 8.2%, down from 9.2% a year ago, while Suffolk County's rate remained unchanged, at 14.5%.

While year-to-date leasing activity edged up by 7% since one year ago, totaling 1.57 million SF, third quarter leasing volume softened with smaller transactions reported as the year progressed. The island's largest transaction in the third quarter was Salomon Smith Barney's lease of 38,000 SF at 58 South Service Road in Melville, Western Suffolk. In Nassau county, notable transactions included IPI Skyscraper Mortgage's planned relocation and expansion from Westbury into 23,000 SF at 1000 Woodbury Road in Woodbury, Eastern Nassau, and the new U.S. headquarters for Swiss International Air Lines Ltd., as the company relocates from Melville into 20,000 SF at EAB Plaza in Uniondale, Central Nassau.

Through the first nine months of 2002, Long Island registered 219,000 SF of positive net absorption -- a complete reversal from negative 245,000 SF in the first three quarters of 2001. By county, net absorption totaled positive 148,000 SF in Nassau throughout 2002, while in Suffolk, a strong third quarter overcame two negative quarters in the first-half, resulting in a positive net of 71,000 SF for the year thus far.

Average asking rents have held steady over the past year, at $24.59 per SF at the end of September, with less class "A" space on the market and an increase in lower-priced class "B" space. Overall, asking rents decreased by $0.15 per SF. "Considering the uncertain economy, we are optimistic yet cautious," said Trump. "Even as corporations continue to consolidate and re-examine their balance sheets, the positive trends reflected in our report show great promise for continued stability and potential growth in our region as we move into 2003."