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M A R K E T B E AT
ECONOMY: Non-Farm Employment Posts an All-Time HighThe Long Island labor market reached an all-time high of 1.4 million jobs at the end of October, growing by 3,100 jobs in the fourth quarter after a slight midyear dip. Quarterly gains throughout most office-related industries helped push the unemployment level downward 20 basis points (bps), matching the national rate of 3.6%. Despite a cumulative yearly loss of 4,800 jobs within the office-using sector, the education and healthcare industry offset the loss, and dominated overall job market growth by expanding by 8,105 jobs to 283,558.
SUPPLY AND DEMAND: Quarterly Leasing Regains Momentum while Vacancy Ticked Lower YOYThe Long Island office market concluded the fourth quarter with improved market fundamentals. The overall vacancy rate finished the year at 10.4%, increasing 40 bps quarter-over-quarter. Nassau County logged a 50-basis point (-bp) rate hike from year-end 2018 as additional premium space came online in both the Western and Central Nassau submarkets. The considerable drop in available Class A space in Western Suffolk propelled the market’s annual decline, as the vacancy rate for this submarket fell 470 bps to 10.9%. Class B space in Central Suffolk County didn’t fare as well; more than 173,000 square feet (sf) of Class B space became available in Central Suffolk County, pushing its vacancy rate to 16.2% during the same period. Despite these shifts in availability, the overall market vacancy improved by 40 bps compared to this time last year.
ABSORPTION: Occupancy Losses Recorded at Year-End Despite Rising Demand While Long Island marked the year with a rise in demand and steady momentum, quarterly occupancy losses in three submarkets hampered overall absorption totals at year-end. Nassau County sustained positive absorption quarter-over-quarter, recording 85,357 sf of occupancy gains, but notable losses at the beginning of the year prevented the county’s year-to-date total from falling into the black. In Suffolk County, a bulk of Class B availabilities in the Central Suffolk submarket contributed to the more than 250,000 sf of negative absorption during the fourth quarter. In turn, Long Island’s quarterly net absorption fell into the red and yearly absorption descended to negative 21,736 sf.
12-Mo. Forecast
SPACE DEMAND / DELIVERIES OVERALL VACANCY & ASKING RENT
Source: BLS
YoY Chg
LONG ISLANDOffice Q4 2019
10.4%Vacancy Rate
-22KNet Abs. YTD, SF
$31.13Asking Rent, PSF
ECONOMIC INDICATORSQ4 2019
3.6%
12-Mo. Forecast
Long IslandUnemployment Rate
1.4MLong Island Employment
3.6%U.S. Unemployment Rate
YoY Chg
(Overall, All Property Classes)
-400
200
800
2015 2016 2017 2018 2019
Thou
sand
s
Net Absorption, SF Construction Completions, SF
0%
5%
10%
15%
20%
$28
$29
$30
$31
$32
2015 2016 2017 2018 2019
Asking Rent, $ PSF Vacancy Rate
M A R K E T B E AT
LONG ISLANDOffice Q4 2019
LEASING ACTIVITY: Annual Leasing Total Reaches Highest Peak in Five Years Following two consecutive quarters of decreased momentum, market demand recorded returned growth in the final quarter of 2019. Strong tenant demand during the fourth quarter yielded 348,432 sf of newly signed deals. As a result, annual leasing activity exceeded 1.4 million square feet (msf), ahead of 2018’s pace by 42.3%—the market’s highest annual total since 2016. Leasing renewal activity echoed its robust performance from the previous quarter and further signified the health of the overall market with 161,039 sf of renewals inked. In fact, the top three lease transactions during the quarter were comprised of tenants opting to remain at their current locations, the largest of which being a national insurance company which renewed 75,411 sf in the Eastern Nassau County submarket.
PRICING: Overall Asking Rents Edge Higher, Posting Year-over-Year Improvements Long Island overall asking rents remained on par from the previous quarter, closing out the year at $31.13 per square foot (psf). Four out of five submarkets logged yearly improvements which caused overall asking rents to rise $1.91 annually. The rental rate hike was predominantly attributed to rising asking rents amongst Class B space in both the Western Nassau and Western Suffolk submarkets. Class A space also documented year-over-year improvements, as high-quality space across Long Island now commands $34.58 psf—a 6.2% premium compared to one year ago. While asking rents for office product in 2019 oscillated compared to years past, market stability should keep rents at healthy levels and steady through the first half of next year.
$22
$26
$30
$34
$38
Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 Q4 18 Q4 19
$ PS
F
Class A Class B
ASKING RENT COMPARISON
0.0
3.0
6.0
9.0
2015 2016 2017 2018 2019
MSF
A B
VACANT SPACE BY CLASS
0
100
200
0-4.9k 5-9.9K 10-19.9K 20-49.9K ≥50K
# of
Blo
cks
Class A Class B
BLOCKS OF CONTIGUOUS SPACE
Outlook
• Long Island office real estate market fundamentals are likely to strengthen, driven by healthy demand and gradually rising rental rates
• Newly proposed and under construction mixed-use projects should lead an additional supply of Class A office space over the next 24 months
• Peak employment levels and low interest rates will likely stimulate additional market growth through the first half of 2020
M A R K E T B E AT
SUBMARKET INVENTORY (SF)
SUBLET VACANT
(SF)
DIRECT VACANT
(SF)
OVERALL VACANCY
RATE
CURRENT QTR OVERALL NET
ABSORPTION (SF)
YTD OVERALL NET ABSORPTION
(SF)
YTD LEASING ACTIVITY
(SF)
UNDER CNSTR
(SF)
OVERALL AVG ASKING RENT
(ALL CLASSES)*
OVERALL AVG ASKING RENT
(CLASS A)*
Western Nassau 6,828,063 4,867 405,008 6.0% -12,869 1,797 102,471 0 $37.86 $37.97
Central Nassau 9,039,993 104,506 902,003 11.1% 77,757 -241,546 357,991 0 $32.68 $35.79
Eastern Nassau 6,294,276 31,753 490,034 8.3% 20,469 104,101 290,371 0 $31.94 $39.27
NASSAU TOTALS 22,162,332 141,126 1,797,045 8.7% 85,357 -135,648 750,833 0 $33.15 $37.01
Western Suffolk 8,455,148 67,732 852,065 10.9% -55,909 312,963 465,708 0 $30.63 $32.63
Central Suffolk 5,490,329 121,456 765,785 16.2% -195,896 -199,051 205,762 0 $26.16 $29.26
SUFFOLK TOTALS 13,945,477 189,188 1,617,850 13.0% -251,805 113,912 671,470 0 $28.86 $31.75
LONG ISLAND TOTALS 36,107,809 330,314 3,414,895 10.4% -166,448 -21,736 1,422,303 0 $31.13 $34.58
*Rental rates reflect gross asking $psf/year**Does not include renewals
MARKET STATISTICS
LONG ISLAND Office Q4 2019
KEY LEASE TRANSACTIONS Q4 2019PROPERTY TENANT SIZE LEASE TYPE SUBMARKET
90 Merrick Avenue, East Meadow MLMIC 41,197 Renewal* Central Nassau
175 Broadhollow Road, Melville Adecco, Inc. 37,977 Renewal* Western Suffolk
25 Newbridge Road, Hicksville Synclaire Brands 22,000 Renewal* Eastern Nassau
*Renewals not included in leasing statistics
KEY SALES TRANSACTIONS Q4 2019PROPERTY SELLER/BUYER SIZE PRICE / $ PSF SUBMARKET
585 Stewart Avenue, Garden City Bunsis & Company/KMR Equity Partners LLC 155,000 $31.0M/$200 Central Nassau
267 Carleton Avenue, Central Islip Esposito Fuchs Taormina & Company/Venetis Trust 21,300 $5M/$239 Central Suffolk
INVENTORY (SF)
SUBLET VACANT
(SF)
DIRECT VACANT
(SF)
OVERALL VACANCY
RATE
CURRENT QTR OVERALL NET
ABSORPTION (SF)
YTD OVERALL NET ABSORPTION
(SF)
YTD LEASING ACTIVITY
(SF)
UNDER CNSTR
(SF)
OVERALL AVG ASKING RENT
(ALL CLASSES)*
OVERALL AVG ASKING RENT
(CLASS A)*
Class A 17,839,356 245,117 1,537,553 10.0% -49,095 29,007 590,439 0 $34.58 $34.62
Class B 18,268,453 85,197 1,877,342 10.7% -117,353 -50,743 831,864 0 $28.43 $28.53
*Rental rates reflect gross asking $psf/year**Does not include renewals
M A R K E T B E AT
LONG ISLANDOffice Q4 2019
OFFICE SUBMARKETS
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