Cush/Wake Report shows steady demand on Long Island

Real Estate Weekly, April 25, 2001

Long Island is posting a low overall vacancy rate of 8.6%, as well as an increase in leasing activity compared to one year ago, according to a year-end real estate report released by the Research Consulting Group of Cushman & Wakefield of Long Island, Inc.

The Long Island office market continues to exhibit a two-year trend of strong demand, according to Cushman & Wakefield sources. "The vacancy rate reflects a healthy balance of supply and demand, having remained below 10% since year-end 1998," said Kenneth M. Krasnow, regional managing director of Cushman & Wakefield's Long Island, Westchester, and Connecticut operations.

"We expect this trend to continue, as Long Island has not relied heavily on the types of dot.com companies that have recently leased large blocks of space in many markets around the region," said Krasnow. "Therefore, we do not anticipate any significant amount of space coming on the market anytime soon."

Leasing activity totaled 2,64,8,769 SF for the year 2000, an increase in activity over last year's total of 2,498,034 SF. The average asking rental rate, $26.97, increased by $1.02 per SF, topping last year's $25.95 per SF.

Despite several speculative projects that have been completed this year, Long Island's vacancy rate remains low. The highest-profile speculative project of the year was the completion of the multi-million dollar office conversion by Reckson Associates Realty Corp. at 50 Marcus Drive in Melville. The conversion, known as the Melville Technology Center and offering 170,000 SF of space, is already fully leased.

Another significant project is i.park, the conversion of the former Lockheed Martin facility at Lake Success into a one million SF, high-tech office park. Cushman & Wakefield is the exclusive leasing agent on the project, and has already negotiated significant tenant leases.

Speculative projects completed in 2000 include a 22,000 SF building at 773 Sunrise Highway in Lynbrook, a 103,000 SF building at 88 Froelich Farm Boulevard in Woodbury, and a 106,000 SF property at 155 Pinelawn Road in Melville.

"Market activity on Long Island remains robust, with many tenants committing to large blocks as soon as they are listed or even during the pre-leasing stage," said Krasnow.

Nassau county continues to show lower vacancy rates than Suffolk county. In Eastern Nassau county, the overall vacancy rate remained low at 4.1%, while class A space shows a tight 2% rate. Western and Central Nassau County overall vacancy rates are 6% and 8.2% respectively. For Suffolk county, the overall vacancy rate reached 12.4%, an increase from 10.2% in 1999. Western Suffolk county reported a 12.1% rate, up from 11% last year at this time, while Central Suffolk county increased to 12.9%, more than 8.6% last year. The increase, according to Cushman & Wakefield research services, is concentrated in the Hauppauge area, and may be related to the recent changes within the mortgage services industry.

Overall conditions appeared to slow between the third and fourth quarters of 2000, but in December two significant leases were signed, which propelled leasing activity to more than 2.6 million SF. Telecommunications companies had the strongest presence.

Cushman & Wakefield is optimistic about the office market in 2001, and has particular confidence in Nassau county; at this time Eastern Nassau county continues to reach full occupancy, with only one building listing a block of space more than 50,000 SF. The conversion project at i.park offers the only substantial block of office space in the county. In Suffolk county, speculative projects continue as well, adding a total of 446,081 SF to the Route 110/Melville area in 2001. "Many are predicting an economic slowdown for the first half of 2001," said Krasnow. "However, we predict that Long Island's broad range of industries will serve as protection in the coming year."