Long Island Commercial Real Estate Market Report – Q3 2015
By now we hope that you look to us, American Investment Properties, as subject matter experts in all things related to commercial real estate. Part and parcel of us establishing ourselves as field experts enables us to provide you with the most up to date information, facts, and statistics about Long Island’s commercial real estate market.
As we do once every quarter, today we will provide you with Long Island’s commercial real estate market report for the third quarter of 2015. In this report, we will cover Long Island’s retail, office, and industrial markets. To most easily digest this information, we will break it down simply by market with a focus on vacancy rates, rental rates, and cap rates. On a whole, Long Island’s CRE markets are strengthening by showing healthy statistics across all Long Island Markets.
First, we’ll explore Long Island’s Retail Market – The Nassau and Suffolk retail market experienced slight positive change in the market conditions in the third quarter of 2015. The vacancy rate fell from 4.2% in the previous quarter to 4.1% in the current quarter. Over the past four quarters, the retail market has seen an overall decrease in the vacancy rate, another proof-point of a growing economy, with the rate decreasing from 4.6% at the end of Q4 2014, to 4.4% in Q1 2015, 4.2% at the end of the second quarter of 2015, and to 4.1% in the current quarter.
As for rental rates, they have increased from the second quarter of 2015 ending at $25.09 per square foot for the third quarter of 2015. This represents a 1.5% increase in rental rates in the current quarter, and a 2.83% increase from four quarters ago. Decreasing vacancy rates and increasing rental rates are positive signs in the Retail Market.
Regarding cap rates, cap rates have been higher in 2015, averaging 7.00% compared to the same period in 2014 when they averaged 6.56%.
Next, we will look at Long Island’s Office Market - Similar to the retail market, we saw slight positive change in Long Island’s office market in the second quarter of 2015. The vacancy rates in the Nassau and Suffolk County markets decreased from 9.3% to 8.9% at the end of the third quarter 2015, a significant decrease is a reflection of a healthy office market. The vacancy rate was at 9.3% at the end of Q2 2015, and 9.5% at the close of Q1 2015 and Q4 2014.
Rental rates are also up over the previous quarter ending the third quarter at $25.36 per square foot. This represents a 0.9% increase in rental rates from the end of the second quarter, when rents were reported at $25.14 per square foot.
As for cap rates, they have been higher in 2015, averaging at 8.09% compared to the same period in 2014 when they averaged 7.04%.
Lastly, we have the Long Island Industrial Market - The Nassau and Suffolk County Industrial Market ended the third quarter of 2015 with a vacancy falling to 3.9%. This is a substantial decrease from the second quarter where vacancy rates were at 4.4%. And if we glance back, in Q1 2015 vacancy rates were at 4.6%, and at the end of the fourth quarter of 2014 vacancy rates were reported at 4.5%. It appears that vacancy rates for Long Island’s Industrial Market seem to be on a declining trend.
Regarding rental rates, the average rental rate for industrial space was $9.82 per square foot at the end of the third quarter of 2015. This represents a 1.0% decrease in quoted rental rates from the end of Q2 2015 when the rental rate average was reported at $9.92 per square foot.
Lastly, cap rates have been higher in 2015, averaging 8.63% compared to the first six months of 2014 when they had averaged 7.78%.
Please check out our other articles pertaining to Long Island businesses and market trends for past quarters.