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HEMPSTEAD, NY-Early this month, in Nassau County Executive Thomas Suozzi and the Lighthouse Development Group announced a proposed lease agreement for the massive mixed use Lighthouse project, a planned mixed use development surround the Nassau Coliseum in the Town of Hempstead. The new agreement, was for a sports transaction and ground lease for the 77 acres surrounding the Nassau Coliseum, home to the New York Islanders hockey franchise.

Lighthouse Development Group is the joint venture headed by Islanders owner Charles Wang and Scott Rechler, CEO and chair at RXR Realty. The group seeks to build over 2,000 units of housing, retail and entertainment venues along with office space, a sports technology industry incubator, exhibition facilities as well as a multi-million dollar renovation of the existing 1970s-era coliseum. The group also plans a five star hotel, said to be Long Island’s first, and it’s all reportedly set to be done in eight to 10 years, provided all the necessary zoning and environmental impact approvals are granted by the Town of Hempstead. Before that stop, the project had already essentially been stalled for five years before Nassau County’s governing body gave its green light to the project developer.

As RXR CEO and Chair Scott Rechler told GlobeSt.com in early October after the proposed lease agreement was announced, “it has been a lot of work to get a fully negotiated lease with Nassau County.” But, he said, “we still need to get the municipality to provide the zoning approval. We’ve got to get over a roadblock in that.” He added, “whenever you deal with these things, you get concerned that politics gets in the way. So until something’s actually done, you just never know.”

The “Island” beyond the borough of Queens consists of numerous borders and government entities, including two counties, countless townships, villages and hamlets along with various civic organizations each with its own set of regulations, interests. For developers, that often presents obstacles.

The days when open space beckoned millions from the crowded city to the green lawns of Long Island seem like ages ago. Put simply, Long Island has very little developable land, and with a recession raging across the nation, there are increased fears that unemployment may call for pro-activity by local government that include innovative incentives to lure business and job creation.

“Long Island has been known as a very difficult region to get developments off the ground, because of all the red tape and politics involved,” says Gary Meltzer, a partner at Meltzer, Lippe, Goldstein & Breitstone in Mineola, NY. “There are many agencies, all with power, so some projects can take years to get off the ground.”

In recent years, Meltzer says a more ‘progressive’ tone has been seeping into government, where officials were beginning to be more open to development. However, he says since the recession, that pro-development has only been accelerated since many officials are recognizing “development keeps local economies going.”

Currently, most indicators show that Long Island’s economy, including commercial real estate is relatively stable. Office renewals have experienced uptick and other property sectors are holding their own. And, despite a few recent high profile blows, there have been indications the area could see growth in what some call the new economy, the bio-technology and tech research sector, thanks to incubators associated with area universities.

Detailed in a portion of Robert Caro’s biography of New York City master builder Robert Moses, The Power Broker, Long Island is a study in the rapid suburbanization of America. In the years during and after the Depression, roads began to open the Long Island’s large swaths of open space to development. Growth, fueled mostly by New York City residents seeking relief from the crowded pavement of the city was rapid. In fact, during the decade after Moses opened the Southern State Parkway in Nassau County, 200,000 new residents moved in, but along with the explosion in population, only 12,000 new jobs in the area.

Even today, as many as 22% of Long Island’s working residents commute to Manhattan according to a Federal Reserve Bank study. Currently, Nassau County’s per capita income stands as the third highest in New York State according to the census Bureau while Suffolk County ranks sixth.

Meltzer says the business corridors are around Uniondale near the Nassau coliseum. He says businesses also are interested in the Melville area in Suffolk County and Great Neck’s Marcus Avenue section. He says the other big area is Riverhead, an area he says developers think of as the next frontier for Long Island.

Hoping to get Riverhead off the ground someday is Rechler Equity managing partner Mitchell Rechler. He says that in the 1950s, his grandfather started the company and by early 1960s, the company was developing Long Island, its first project on the island being the Vanderbilt Industrial park in Hauppauge. Rechler explains that the Long Island market has changed dramatically since the late 1980s.

“Long Island was really a defense industry-centric economy before the late ’80s,” he says. “There was a tremendous amount of engineering and manufacturing related to the defense industry.” But, Rechler says that in those years simultaneous to the last downturn, the defense industry cut back and closed literally millions of square feet of operations on the island.

Then, he says, over the course of the next five to 10 years, Long Island evolved into a service oriented economy that was serving the Island’s population, now around three million. “It’s rare that a headquarters moves here from someplace else,” says Rechler. Instead, he says, “they develop here, because there’s a huge amount of business growth and entreprenureal spirit.”

Rechler says there are some manufacturing firms still on the island that relate to computer technology, aeronautics, homeland security but, most of the office market is dedicated to servicing Long Island. He calls the area the classic infill market.

“At this point, Long Island is very developed,” says Rechler, whose company hopes to break ground in a year or so on a business and technology development at Grabreski Airport at Suffolk County’s east end. He says the mixed-use development, to be called Hampton Business and Technology Park, is the perfect example of Suffolk County and local municipalities working together in the approval process.

But on the other hand, Rechler couldn’t offer many details on the 300-acre business and technology center at Calverton. In that case, Rechler says the development is in the beginning stages of the approval process. Rechler says the project in the Town of Riverhead has the local municipality’s support, but local civic organization and state agencies are a challenge.

“There’s no big tracts of land in Nassau County at all,” and in Suffolk, “there are a few more that are possible for development, Riverhead being one of them.”

Dominic Paparo Jr., VP of business development at EW Howell construction in Woodbury, calls his company’s relationships with Long Island municipalities solid across the board. He notes that each town has different rules and processes, but adds, “each one has the same goal, which is an inspected, safe building for the public.” Still, he acknowledges, each one “has different processes for getting there. It’s something where there is always a learning curve.”

These days, he says the bulk of his work comes from government agencies, for example, three projects at Stony Brook. He said retail work on the Island has slowed significantly, while institutional is picking up, with more work expected from Brookhaven National Laboratory over the next two to three years.

Ellen Rudin, managing director of the Long Island Operation at CB Richard Ellis, says renewals indicate signs of stability on the Island. Rudin, who oversees day to day operations at CBRE’s offices in Woodbury and Long Island City in Queens, says “many of the tenants on Long Island tend to stay on Long Island.” She calls current times an opportunity for tenants looking to renew.

However, Rudin adds the price differential between a good market and a bad market is not that dramatic. “So to wait for a bottom, even a lot of tenants out here realize, doesn’t make sense.”

Rudin says landlords are being very aggressive. They don’t want to lose tenants and more than ever, they are reaching out and working with tenants.

Mitchell Rechler affirms that observation, saying from a leasing standpoint, he was more active this year than the 12 months before. He said the vast majority of all his new leasing activity was industrial. By comparison, the office market is tougher and more competitive.

“Generally speaking, no one is looking to spend money,” and the “cost of moving make the likelihood of an office tenant staying where they are, more likely than in previous years,” says Rechler. “Where we had 96.5% occupancy rate this time last year, we have 93% occupancy this year.”

Again affirming Rudin’s observation, Rechler say any new tenants he’s seen have been Long Island companies. “We are signing some leases with companies that are growing.” He tells the story of a company that moved out of a building in Brentwood to one of his properties, because of a company growth issue.

Looking to the future, Rechler says, his firm designs buildings with tremendous flexibility. “If it’s a warehouse distribution-type user, we can accommodate because we design with the height and required spacing,” he says. “If they require lab space, our mechanical systems are designed to provide flexibility, providing air conditioning and necessary environmental conditions for lab use. And, with office or combination facility, we can design buildings the client can split into smaller spaces.

Still, Rudin says there should be greater effort at growing and maintaining the area’s burgeoning biotech sector. Local leaders have to recognize, she says, that governments in other parts of the state and nation are aggressively courting high tech companies with lucrative incentives.

As a case in point, this past July OSI Pharmaceuticals, the island’s largest such company said it would consolidate its U.S. operations into a single campus in the Westchester County community of Ardsley. That month, Newsday reported that an OSI spokeswoman had said OSI wanted to expand at Farmingdale State College and that other companies would follow it there. At that point, OSI occupied 65% of the space there.

But, in an interview with Newsday, OSI’s company chair Colin Godard said “we tried to make biotech work here, it hasn’t, and with us going, it’s going to be a real challenge to make it happen in the future.”<

Reportedly, the company had run into resistance from Sen Charles Fushillo Jr (R-Merrick), who said OSI would be leasing and building on state property without any public bid.

More simply, Rudin says, the company was not able to get the deal it wanted, in the time it wanted. And despite being home to numerous biotech operations, companies Rudin calls success stories, the announcement that OSI would move and bring along its 200 employees caused everyone to pause, and ask, “what happened?”

In the end, leaders may have learned a very important lesson, she says. Of biotech that is born or grows itself on Long Island, Rudin says, “typically, they start small, with certain types of lab space with certain types of requirements, that was built out by the Farmingdale State College campus to attract that type of company. The hope is, they grow into a stand-alone building,” as OSI did.

Of industrial, she says Long Island is home to distribution centers on the east end and near airports, are industrial centers. Problem areas include the middle of Nassau and Suffolk, where Industrial is not trading right now. “It’s very flat,” she says. In other words, “people aren’t doing initiatives, if you will.”

One sign of a green shoot is the site that calls itself “the place where the technology business grows,” the Long Island High Technology incubator. LIHTI works through its affiliation with Stony Brook University to help new technology-innovative companies get on their feet by providing them with support, research and services. The nonprofit says that since opening in 1992, it has been associated with 70 businesses, and 44 companies that its graduated from its programs.

Noting that there are a few tech based incubators on Long Island, LIHTI executive director Anil Dhundale says the reasons they reside where they do is because of the research in places like Stony Brook, Cold Spring Harbor and Brookhaven. He says it’s clear that people have become increasingly interested in the incubator model to build the foundations of a more diverse economy.

On Long Island, the job by government “could be done better,” says Dhundale. But he adds, “there are a lot of organizations that exist on the government side,” to help with finding appropriate real estate and other practical issues. “We all kind of know each other, and it’s more of a network. But, because the world is changing, with economic downturns, money is slow to come, economic incentives take time with government.” Ultimately, he says, New York State and Long Island have been “a little slow to respond to a company’s needs.”

But, Dhundale warns, “That inaction comes at a time when other parts of the country and world are soliciting these companies as they get ready to graduate the incubator, seeing that these new companies might be a good match for their states.”

Of Long Island’s OSI blow, he said “when it hit the papers, all of a sudden, everyone realized what had happened. But it was too late.” He says that in fact, “the move had been coming for years. The facility they are moving to is a beautiful space for them. Overall, government was just to slow to respond. It’s sort of like the marriage that was slowly going the wrong way. All of a sudden, you hear, ‘I’m separating from you’ and it’s too late. You send flowers, but there are years worth of damage, and your efforts are met with non-responsiveness.”

Dhundale spares no punches, saying that for the sake of Long Island’s tech jobs future, there has to be a responsive team with the ability to make decisions on the local level. At present, he says, a company has to go through the New York Legislature to make decisions about leasing space on a local site.

The initial enthusiasm for biotech, he says, is closer to reality today than it was a decade or so ago, when there were overexpectations for the sector. “What happened was an overreaction on the part of investors and even on the part of lay public as to what bio tech is going to do for them. That phase led to a period of disappointment,” but now, he says, “real productivity is beginning to show up.”

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