NORTHEAST SNAPSHOT, DECEMBER 2006
Long Island, New York Office Market
Characterized by solid market dynamics, the Long Island, New York commercial real estate market remained strong during the first three quarters of 2006. Supply and demand remained in equilibrium and the market posted a vacancy rate of just 10.6 percent. Exemplifying the market’s excellent performance were the continued development of new speculative office properties, recycling of former industrial buildings and several significant leasing transactions. In addition, Long Island is now exhibiting above asking rents above for Class A properties, ranging from $31 to $34 per square foot.
Brian Dugan, senior managing director, CB Richard Ellis/Long Island.
Long Island’s success thus far in 2006 follows on the heels of a strong 2005, when Citigroup’s 203,000-square-foot lease commitment was the largest transaction in the market. This year, Honeywell International signed a 133,000-square-foot lease at 2 Corporate Center in Melville and Lifetime Brands is relocating its headquarters into 132,933 square feet (114,474 square feet and 18,459 square feet) at 1000 Stewart Avenue in Garden City.
This robust leasing activity has been the impetus for numerous speculative development projects throughout Long Island and the conversion of older, antiquated buildings, both in Nassau and Suffolk Counties, to office use. Savvy developers are basing their decisions to redevelop not only on the tremendous leasing activity the market has experienced during the past few years, but also on the constantly rising investment sales figures.
Another result stemming directly from Long Island’s strong performance over the past few years is the influx of several new office developers entering the fray. CLK/GHP Office Realty and Metropolitan Realty Associates are just two of the new breed of developers making waves in Long Island. Through a joint venture, Metropolitan Realty Associates and Angelo Gordon & Co. purchased a 363,500-square-foot office property located at 3500 Sunrise Highway in Great River. Metropolitan plans to complete a multi-million renovation of the property, which will include the conversion of a 136,000-square-foot warehouse for office space.
In addition to the trend of converting older properties to office use, there are a number of new speculative office buildings underway. Specifically, there are two, Phase II projects taking shape in different Long Island submarkets. The first development is 1991 Marcus Avenue, a 188,000-square-foot office building in Lake Success. The building is in close proximity to the Long Island Expressway, Lakeville Road and the Northern State Parkway. Amenities will include an on-site cafeteria, the most technologically advanced life safety systems and outdoor and covered parking facilities. Occupancy is scheduled to begin in April 2007.
The second major Phase II development is 102 Motor Parkway, a 208,770-square-foot, Class A office building in the Hauppauge submarket. The property is scheduled to be completed in the second quarter of 2007. Among its many amenities will be a conference center, a full-service cafeteria, a fitness center and 24 hour access and security.
Other potential projects on the horizon include the Lighthouse at Long Island and the redevelopment of the Nassau County Coliseum site. The Lighthouse Development Group, a joint venture between Reckson Associates and Charles Wang, is redeveloping the Hub, which will contain the remodeled Nassau Coliseum, a conference center, a hotel and a town square for retail venues. Redevelopment at the Northrop Grumman property and several other Nassau county sites is also expected to take place. In addition, industry insiders should keep a close eye on two or three sites on the Robbins Lane Corridor for future developments.
Similar to other major markets in the Northeast, Long Island’s surge in new office projects has been followed closely by retail development. Long Island is experiencing a big push toward retail development in Suffolk County. Suffolk County’s Farmingdale and Deer Park submarkets have seen stronger demand for retail as compared to office and industrial. Finally, Eastern Suffolk County’s Yaphank area is ripe for industrial development and the upgrade and transformation of the Hauppauge Industrial Park is expected to continue.
— Brian Dugan is the senior managing director at CB Richard Ellis/Long Island.
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