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NORTHEAST SNAPSHOT, MARCH 2006
Long Island, New York Office Market
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Jim Wenk, Director, The Staubach Company
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The Long Island, New York office market recently has seen a surge in speculative development due to the lack of new state-of-the-art facilities. In addition, the conversion of outdated flex buildings to Class B office space has been a growing success for developers attempting to attract a more economic value-oriented tenant. Generally, the rental rates on Long Island range from approximately $20 per square foot to $34 per square foot, depending on the submarket, and the overall vacancy rate for the market currently stands at 12 percent.
Within the financial services industry, mergers and acquisitions, along with implementation of strategic real estate plans, have caused a shortage of large block availabilities in well located submarkets. Markets such as Melville. Garden City and Jericho are indicative of this trend, which indicates that in the short-term, the market can uphold some level of speculative development to create new inventory to match the infrastructure needs of today's tenants. NorthFork Bank and Greenpoint, JP Morgan Chase and Bank One, and Citigroup are just some examples of the recent companies that have perpetuated this activity.
A majority of development is taking place in several areas across the Long Island market. In Melville, New York, speculative properties and flex building rehabilitation projects are underway in an attempt to increase the supply of quality office space. For example, Reckson is developing 68 South Service Road in Melville, which is a state-of-the-art, 315,000-square-foot, Class A office building. Citibank recently leased 200,000 square feet within the development.
In addition, Hauppauge, New York, is seeing the redevelopment of older industrial buildings into high-end flex space and/or Class B office buildings. Over the past 6 to 9 months, this model of renovation and redevelopment has been quite successful and should sustain that level of productivity for the future.
In the future, Woodbury and Ronkonkoma/Bohemia, New York, should see an increasing amount of activity, because these markets are seeing an expansion in the local service sector such as legal, accounting and insurance. Furthermore, look for the market to stay at or near equilibrium as additional speculative supply enters the market; the new developments effectively will offset recent service sector expansion. Industrial availability will remain tight as logistics and warehousing-type tenants and their business units streamline operations and implement facility needs.
— Jim Wenk is a director for The Staubach Company.
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