NORTHEAST SNAPSHOT, JUNE 2007

Long Island, New York Office Market

As the first suburban community of New York City, Long Island has matured and gone from being known simply as a “bedroom community” to a viable commercial market within its own right. Due to this change, the office market has been experiencing a gradual migration eastward. However, in recent years, the Long Island office market has seen little new development due to geographic barriers and a limited amount of prime developable land. There are some viable pieces of land in the western section of Long Island, and conversions of well-situated industrial plants combined with a gentrification of downtown markets like Hempstead also afford development opportunities for office space, however, development is still limited.

The direction of several new developments is expected to affect the office market greatly in Long Island. For example, the master plan for Downtown Nassau hinges on the development of the Hub at Mitchel Field. The project is slated to combine millions of square feet of office and retail space. This massive development will also contain a series of monorails, which will allow residents the opportunity to relinquish the use of their cars.

Heart Town Square is a new development situated where the Long Island Expressway meets the Sagtikos Parkway. The owners of this development have envisioned it as Long Island’s first smart growth community. The project will include 3 million square feet of Class A office space, 9,000 housing units, a 1 million-square-foot lifestyle center, a state-of-the-art hotel and convention center, indoor and outdoor civic space and an aquarium. Fusing these venues in a planned development will create a community that looks inward instead of the typical suburban sprawl that is forcing increased automobile usage.

In addition, RexCorp is currently transforming one of Long Island’s premier office complexes into RexCorp Plaza, which will feature 1.1 million square feet of office space contained in two 15-story glass towers. While there are very few new developers planning projects in Long Island, many new investors are moving into the area to invest in Long Island’s existing office product.

Two major leases of note closed recently in the Long Island area. Broadridge Financial, which is a spinoff of ADP, leased 70,000 square feet at Gateway at Lake Success, an office building located at 1981 Marcus Avenue in Lake Success, New York. In addition, Honeywell has leased 140,000 square feet of space at 2 Corporate Drive, in Melville, New York. Rental rates for Class A office space is ranging from $28 per square foot to $38 per square foot, plus electric. The vacancy rates for office space in Long Island varies per submarket, but overall, vacancy for Class A office space in Nassau is 7.33 percent and the vacancy rate for Class A office space in Suffolk is 9.63 percent.

As the Hempstead area undergoes a significant revitalization and the Hub at Mitchel Field continues on its current path of development, these two markets will be places to watch for more office activity and development in the near future. In Suffolk, the Deer Park/Edgewood submarket will also be another area for investors to keep an eye on as activity in the Long Island office market continues it migration.

— Herbert Agin is the CEO of Sutton & Edwards/TCN Worldwide.


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