Report points to continued confidence in LI market

Real Estate Weekly, August 11, 2004

The second quarter of 2004 proved sensational for Long Island's commercial real estate market. Spurred by Nassau County's 217,000-square-foot commitment at 60 Charles Lindbergh Boulevard in Uniondale, NY, the Long Island market posted 783,000 square feet in total leasing and 405,000 square feet of positive net absorption.

According to CB Richard Ellis' 2nd Quarter 2004 Office Market Report, the market's availability rate dropped by more than half a percentage point over the first quarter to just 9.5%, the lowest availability rate in the Tri-State Region. As a result of this resurgence, rental rates increased by $.27-psf over the first quarter and now stand at $24.50-psf.

In addition the Nassau County lease, activity throughout the market was extremely robust as companies continued to renew and expand throughout the area.

For example, Arbor Commercial Mortgage renewed A band expanded to 27,300 square feet of space at 333 Earle Ovington Boulevard in Uniondale and Bank of Smithtown leased 25,600 square feet at 100 Motor Parkway in Hauppauge, NY.

In contrast to the previous quarter, Class A office space experienced most of the leasing activity. This segment posted 469,000 square feet in total leasing during the second quarter, compared to the 313,000 square feet of Class B space.

A bigger differentiating factor between Class A and B space was in average asking rents. Class A space continued to go for a premium with an average asking rent of $27.21-psf--$.71-psf higher than the asking rents recorded during the first quarter of the year.

At $21.93-psf for the quarter, Class B average asking rents dropped by $. 11-psf during the same period.

On the investment sales front, the market continues to be flush with equity and debt. These factors, combined with low interest rates and an expanding economy are driving activity. During the second quarter of 2004 five major office transactions with an aggregate price of $75.55-million and totaling 461,000 square feet were completed.

Among the largest transactions was Treeline Companies' acquisition of 400 Garden City Plaza for $30 million from Reckson Associates Realty Corp.

In addition, Damianos Realty Group purchased 222 Middle Country Road for $11 million from Branch Office Associates and Fairfield Properties acquired 50 Route 111 for $7.4-million from Hillside Plaza Associates, both properties located in Smithtown, NY.

Over the past six months of 2004, leasing activity has shown incredible resiliency.

Furthermore availabilities have dropped below equilibrium due to a sixth consecutive quarter of positive net absorption.

Industry experts, while cautiously optimistic, predict that the Long Island commercial real estate market will continue to be a strong performer.