Long Island Office Market Remains Steady

Leasing activity finished the second quarter of 2008 on par with the second quarter of 2007. The 739,147 sf leased throughout the region represented a 1.3% gain since last year, the C&W report says. The positive activity was attributable to the healthy Suffolk County market, where at 361,075 sf of leased space, made a year-over-year gain of 67.5%. Lend America's lease of just over 57,000 sf at 520 Broad Hollow Rd. in Melville was the largest for the quarter.

According to CB Richard Ellis' Q2 report on Long Island, for the second consecutive quarter, Long Island office vacancy was reported at 11.9%, slightly under the 12.6% vacancy reported one year ago. Although leasing activity declined from 701,113 sf in the first quarter to 481,100 sf in the second quarter, year-over-year leasing activity was greater in 2008. As for the Suffolk County market, availability increased by 0.8 percentage points quarter-to-quarter, however, it remained one point below the reported availability during the same period last year. Leasing activity in Suffolk County decreased quarter-to-quarter and year-to-year, however, the overall average rent increased to $24.64 per sf, the report says.

According to CBRE, the Long Island office market continued to outperform the other suburban markets around the region during the second quarter of 2008. While Long Island availability increased to 14.3% quarter-to-quarter, it was still 0.6 percentage points below New Jersey, which reported availability at 14.9%. Stamford availability increased to 15%, and Westchester's availability was the highest at 17.5%.

"Despite increased indications of market softness, the office leasing market across Long Island remained stable during the first half of the year," says Bob Sheehy, executive vice president and branch manager of C&W's Long Island office. "As with most markets, employment softness in 2008 is expected to lead to a slight increase in vacancy, but due to lack of new supply and limited new construction we see those numbers heading down again in 2009."

C&W reports that Long Island is expected to experience a softening office market throughout the remainder of 2008. With leasing activity par with 2007, and $111 million in investment sales deals recorded during the second quarter of the year, Long Island's office market will not be hit as severely as the national economy. "Large corporations however, remain cautious and will continue to pursue reduction in space," the report says. "The slowdown is projected to be mild and brief."

CBRE's investment review says that sales activity remained active during Q2, with eight transactions, including four institutional sales, completed. The largest transactions included the sale of 401 & 501 Franklin Ave. in Garden City. The sale to a local investor included a partial leaseback by Bookspan, a division of Bertelsmann AG. The 260,000-sf, two building campus sold for $66.5 million. One Old Country Rd. in Carle Place was purchased by CLK/Houlihan Parnes. The 316,000-sf office building which is the headquarters for 1-800-Flowers, sold for $65 million. Also, 1400 Old Country Rd. in Westbury shed to Samson Management for $69 million.