NORTHEAST SNAPSHOT, MARCH 2008

Long Island, New York Industrial Market

As the commercial real estate market evolves, industrial development on Long Island has shifted from a from a manufacturing focus to more high-tech industries; however, the strength of the today’s market is warehousing. To attract high-tech and warehousing tenants, developers are constructing facilities with higher clear ceiling heights, and due to the high cost and the low availability of land, older industrial buildings are being recycled to accommodate bulk warehouse users. In addition, roof raising of older buildings has become more prevalent in order to accommodate the needs of these tenants.

A fair amount of this new industrial development is taking place in eastern Long Island. It is the only region with available, affordable and developable land. Many developers are also looking to the eastern region because of good economic incentives such as tax abatements.

The town of Brookhaven in eastern Long Island happens to be one of the fastest growing markets at this time. Quality King is currently constructing more than 500,000 square feet of high-ceiling warehouse space there. This development is expected to generate even more activity in the area and it will have a positive impact on property value as well.

On the flip side, the high value of land is generating the need for higher-end use. Several large industrial complexes such as the EDO facility in Deer Park and areas along the Route 110 corridor are undergoing changes from industrial use to wholesale/retail/office use.

Rental rates for industrial properties are hovering between $7 to $8 net per square foot. However, most major users are opting to buy product rather than lease due to such a well-heeled and mature market. Vacancy rates range from a healthy 8 percent to 10 percent.

As the next major North and South route on Long Island, the William Floyd corridor is one submarket to keep an eye on for future activity. With much of the development taking place on the east end, this area is perfect for transportation in all directions. In addition, the local government is offering a host of benefits and economic incentives, which are expected to bolster much development in the area.

— John Pujia is the senior director of the Greiner Maltz Co. of L.I., Inc.

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