Long Island Vacancies Fall, Rents Rise

For the two-county Nassau-Suffolk region, the office vacancy rate at the end of the quarter was 10.7%, down from 11.1% three months earlier. Overall asking rents were $26.45 per sf on average, up from $26.36 in the first quarter and $25.80 in the 2005 second quarter.

The 2006 second-quarter island-wide vacancy rate for class A buildings was 8.83% and the average asking rent was $28.99 per sf. The vacancy rate for the first quarter was 9.27% and the average rent was $28.82. In the 2005 second quarter the vacancy rate was 12.5% and rents average $27.42.

"The strength of the market combined with deals that recently were completed or currently being negotiated will mean a tremendous drop in the inventory during the third quarter," says Alan Rosenberg, president of Sutton & Edwards. He predicts that rising office rents in Manhattan, now in the $80- to $100-per-sf range, will drive smaller deals to Long Island. "It's getting crazy there," he says of Manhattan.

In Nassau, Long Island's most-populous county, the overall vacancy rate declined to 9.79%, from 10.32% three months earlier, but was higher than the figure one year ago, 9.68%. The average asking rent in Nassau was $27.63 for the latest quarter, up from $27.39 in the first quarter and $26.90 in the 2005 second quarter.

Class A space in Nassau continued to experience sharp demand, despite the addition of 100,000 square feet in Jericho, as the vacancy rate for top buildings fell to 8.23%, from 9.23% three months earlier and 9.69% a year ago.

In Suffolk, the second quarter vacancy rate dipped to 12.44%, from 12.5% three months earlier, and was sharply lower from the 13.61% recorded in the 2005 second quarter. Asking rents in Suffolk, however, slipped over the most recent three months to $23.49 per sf from $23.78 in the 2006 first quarter. Rents averaged $23.06 a year ago.

Suffolk experienced a slight quarter-to-quarter rise in class A vacancies over the second three months of 2006, but the vacancy rate remained well below year-ago levels. The latest occupancy figure was 9.99%, up from 9.35% in the 2006 first quarter. However, the rate contrasts sharply with the 17.64% in the 2005 second quarter. Asking rents for prime Suffolk office space dipped slightly over the latest three months to $25.67 per sf, from $25.95 in the first quarter. A year ago, the average asking rent for top space was $25.12. The figures for Suffolk do not include two buildings under construction, 118,000 sf at 324 S. Service Rd., Melville, which will be completed this year, and 200,000 sf at 102 Motor Pkwy., Hauppauge, which won't be finished until 2007.

"It's still pretty flat, especially in Suffolk," Rosenberg notes. "It goes in spurts."