Industrial Absorption, Rents Break Records on Long Island
Net absorption YTD at all-time high, asking rents for new warehouses hit $24/SF.
Demand continues to outpace supply in Long Island’s industrial market, driving rents to record heights. Leasing velocity reached 854K SF in Q2 2022, an increase of 56% from the quarterly average since 2019, according to JLL’s Q2 Industrial Insight report for the market.
Industrial vacancies are hovering at around 3.2% on Long Island, with direct asking rents rising to $18.45 per square foot. Year-to-date net absorption has been 640K SF—the highest level in the first half of any year on record, according to JLL.
“This has left just five blocks of space over 100K SF available in Long Island, giving landlords the upper hand in lease negotiations. As a result, average asking rents have risen 30% year-over-year, with new construction buildings now asking as high as $24 per square foot,” JLL’s Q2 report for Long Island said.
According to JLL, the lack of availabilities across the market, combined with the lucrative last-mile prospects of Long Island, has institutional owners locking down sites to develop new distribution facilities.
While warehouse projects under construction only total about 636K SF, the report said more than 10M SF of new industrial development has been proposed for the next four years across Long Island.
Most of the proposed development is earmarked for the eastern half of the market in Suffolk County, where the goal is to double the amount of Class A industrial space and replace an aging inventory of small-bay warehouses.
In the most recent industrial transaction on Long Island, Silverman Group has acquired for $76M an industrial portfolio encompassing nine buildings and a total of 372K SF.
The properties, which were sold by Sherwood Equities in a transaction arranged by Cushman & Wakefield, are located in Melville and Farmingdale. The deal translates to a price of $204 per square foot.
The industrial buildings, which were built in the 1970s, are 98% leased with an average rent of $8.10 per square foot, about half of the average market rate in central Long Island. The portfolio properties sit on the border of Nassau and Suffolk counties in proximity to the Long Island Expressway.
New Jersey-based Silverman, with a diversified portfolio encompassing 25M SF, has 15M SF of industrial space under development.
Melville also is the site of the largest delivery of new industrial space in Q2 2022, a 600K SF industrial campus developed by Hartz at 235 Pinelawn Road.