NORTHEAST SNAPSHOT, DECEMBER 2007
Long Island, New York Office Market
As the nation’s first suburban office market, Long Island reached maturity 15 years ago. Today, geographic obstacles and limited development opportunities are problems currently plaguing the Long Island office market. However, the downtown markets, often overlooked as companies seek a suburban setting for their requirements, provides one area for potential development.
There is very little speculative office development taking place in Long Island; however, there are several notable mixed-use projects under development that will feature office components. The Nassau Hub, located in Mitchel Field in Uniondale, is one of the three significant developments in various stages of the approval process. The county-owned land, which is being leased to the developer, will be a mixed-use project featuring office, retail, housing and recreation.
Heartland Village in Edgewood, formerly the site of Pilgrim State Hospital, is also noteworthy. Like the Nassau Hub, this project will be a mixed-use development, and it is being promoted as the marketplace’s first smart community.
Another new project in Calverton Long Island was formally owned by Northrop/Grumman. The majority of the land will be used for recreational purposes, although an office component is planned.
The aforementioned projects, as well as others that are planned to come out of the ground in the next 5 to 7 years, will only bring a total of approximately 40 million square feet to the office market, leaving a minimal impact at best. However, the cost structure of the new product will increase the cost per-square-foot of the rental market, allowing owners of existing product to increase their asking rental rates.
Leasing velocity in Long Island has increased due to attractive and affordable rental rates. Currently, Class A rental rates range from $26 to $36, and the vacancy rate is sitting at 12.81 percent. Four major leases totaling 177,000 square feet were recently closed. Broadridge closed the largest transaction, taking 80,000 square feet at Gateway Office Park at 1981 Marcus Avenue in Lake Success. AON leased 40,000 square feet at Wireless Boulevard in Hauppage, and Allstate renewed a 30,000-square-foot lease at 1225 Franklin Avenue in Garden City. Finally, Shearman and Sterling closed a 27,000-square-foot lease at 2 HQ in Melville.
As the unofficial dividing line between Nassau and Suffolk Counties, the Route 110 corridor is the area to watch in the near future. More than 250,000 square feet of space is expected to come online following the bankruptcy of major subprime lender, America Home.
— Herbert Agin is the CEO of Sutton and Edwards in Lake Success, New York.
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