The Current Long Island Commercial Real Estate Market September 2013
It is no secret that the Long Island residential real estate market isn’t exactly at historic highs. We at American Investment Properties often have our clients asking us how this phenomenon in the residential market impacts the commercial real estate market on Long Island? In short, the answer is not much.
Recent Vacancy Rates
The Long Island office market ended the 2nd Quarter with a 7.9% vacancy rate, which is a decrease from the 1st quarter. In a very positive sign, over 283,000 square feet of office space has been absorbed in just the 1st half of 2013. Office rental rates are also going strong and ended the 2nd quarter at $26.24.
The largest blocks of space include:
– 86,000 sf @ 111 Marcus Avenue by Hain
– Nearly 36,000 sf @ 80 Arkay Drive by Gemini Fund.
Long Island is looking good in general and compares very well to the national office vacancy rate. Currently, the national US office vacancy rate is 11.7% with average rental rates increasing to $21.60 per sf. Long Island has significantly lower vacancy rates and higher average rental rates when compared to the national averages. In short, the electricity is turned back on in Long Island!
Long Island Vacancy Rates – A Strong Regional Comeback
Long Island real estate is making a strong regional comeback. Office vacancy is 32% below the national average. The rental rate’s average is 21% above the national average indicating that area’s market is most definitely on the rise.
One key reason that commercial real estate on Long Island is holding its value relatively well is due to the dominant leasing segment. Businesses on Long Island need a site for their operations; this factor is unlikely to change anytime soon.
The retail picture is looking good as well. Even though rents are still 15% off their 2007 highs, the Long Island retail vacancy rates are steadily falling. The vacancy rates have fallen from 4.9% in the 1st quarter to 4.7% in the 2nd quarter of 2013. Rental rates on Long Island have increased from the 1st quarter to average $27.95 per sf.
The largest retail transactions of 2013 to date include:
– 42,800 sf @ Delco Plaza in Hicksville to Big Lots
– 32,000 sf @ 40 Vanderbilt Motor Parkway in Hauppauge to North Shore Farms
Retail, National Vacancy Rates and Long Island
The national vacancy rate is 6.7% with average rental rates at $14.50 nationwide. By contrast, the vacancy rate is a mere 4.9%. These numbers illustrate that Long Island has a 30% retail vacancy rate is a mere 4.9%. These numbers illustrate that Long Island has a 30% retail vacancy rate below the national average and commands $13.45 per sf more than the national average. Both statistics serve to underscore the strength of real estate in our region.
The market is continuing to improve on Long Island. In fact, things are looking so good that the Simon Property Group is poised to invest $300 million dollars into the Walt Whitman Mall in Huntington Station and Roosevelt Field Mall in Garden City.
The Nassau County Factor
Long Island’s commercial real estate market maintains its stability by attracting a large supply of tenants; primarily in Nassau County. Nassau County has extremely wealthy and highly educated population that are loyal to the area and willing to commute. Over 60% of the people that live on Long Island also work in the area, and this trend only continues to grow. This factor also helps support Long Island’s commercial real estate market, as tenants are willing to pay the requested rents due to the close proximity to New York City.
Minimal Credit and Mortgage Crisis Impact
The type of tenants in Long Island is also playing an important factor, as they consist of regional offices of major corporations and local companies. This diverse tenant base means that the credit and mortgage crisis ultimately had only a slight impact.