NORTHEAST SNAPSHOT, JUNE 2006

Long Island, New York Industrial Market

J.B. (Jeff) Schwartzberg Senior Director, Industrial Properties Sutton & Edwards/TCN Worldwide

Limited development opportunities and trends tend to favor high ceilings and close proximity to the Long Island Expressway, and users truly are gaining an understanding of the value of “cubic” space. Land is scarce and very expensive, ranging anywhere from $150,000 per acre furthest away from Manhattan to more than $1 million per acre, if and when it’s available, in some Nassau County submarkets. Recent years have seen an increase in redevelopment activity that has resulted in the conversion of existing industrial products into office buildings and, when appropriate, retail facilities.

Rental rates typically average between $8 per square foot and $12 per square foot industrial gross in Nassau County, while generally they sit between $7 per square foot and $10 per square foot for Suffolk County. The vacancy rates for the Long Island industrial sector are very low overall, standing at less than 7 percent. Vacant space of particularly good quality with reasonable ceiling heights located within close proximity to the Long Island Expressway is almost non-existent in Nassau County. Availability is better in Suffolk County, yet it is still not abundant.

On the development side, several significant projects are in the works or underway across Long Island. Steel Equities has and will continue to develop buildings on the properties that it had purchased previously in central Nassau County from Northrop Grumman Corporation. Wesrac Development recently acquired a 10-acre parcel in Hauppauge, New York, which it plans to develop into about 200,000 square feet of industrial use. Intercounty Appliance Corporation and Quality King Distributors, which are two of the Island’s larger user organizations, currently are under construction on a 270,000-square-foot and a 560,000-square-foot facility, respectively; both projects are high bay facilities located in central Suffolk County in Bellport, situated in the township of Brookhaven, New York. Furthermore, Tanger/Blumenfeld Development Group plans to convert the former AIL Defense plant in Deer Park, New York,  located in Western Suffolk County,  into a retail/outlet center.

Further east on Long Island, principally in Brookhaven Township, development has been particularly active, at least moreso than throughout the rest of the market. Land is available (somewhat), and tax benefits are offered regularly. However, no substantial speculative development is underway.

With regard to tenants locating in the area, manufacturing is effectively a thing of the past on Long Island, as most of the industrial product caters to distributors. High-end technology jobs often are sought by local governments, which typically require research and development or office/flex type space. Interestingly, there is approximately 120 million square feet of industrial product in total throughout Nassau and Suffolk counties, yet no one tenant uses more than 1 percent of that space, representing the diverse tenant mix across the island.

Several significant leases have been signed recently in the Long Island industrial sector: LNK Corp signed on for 106,000 square feet at 2002 North Orville Drive in Ronkonkoma, New York; ELM Freight leased 128,000 square feet of space in Ronkonkoma (a building formerly occupied by Atkins Nutritionals); and Huttig Building Products took 125,000 square feet in the Hauppauge Industrial Park along the Long Island Expressway. In addition, ADP Proxy Services Division continues to expand, now occupying more than a half-million square feet in Edgewood, New York.           

In the future, expect development to continue in Brookhaven Township, and Gabreski Airport in Westhampton Beach, New York, which will most likely be developed into an industrial park. However, there is a limited inventory of buildings for sale, forcing more companies to lease; effectively, increases in leasing demand will continue to push rental rates upward.

— J.B. (Jeff) Schwartzberg is senior director, industrial properties, for Sutton & Edwards/TCN Worldwide.

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