Large drops in Class A vacancy rates offset by rising Class B vacancies throughout market
NEW YORK, NY – January 11, 2011 – (RealEstateRama) — Jones Lang LaSalle announced the Long Island office market continued to experience a slight softening throughout 2010. With numerous leasing opportunities available, space users showed heavy interest in top-quality spaces throughout Long Island, helping to fuel a rise in availabilities among Class B properties.
“During the course of 2010, the Long Island office market softened as overall vacancy increased and the area experienced negative absorption of 640,432 square feet for the year,” said Raymond Ruiz, executive vice president and head of the firm’s Long Island office. “One favorable indicator was positive absorption among Long Island’s sublease spaces, which totaled 288,975 square feet. This can be attributed to firms being opportunistic and looking to take advantage of extraordinary value in what remains a tenant’s market. With sublease space beginning to diminish, it is anticipated that leasing activity for direct space will increase in 2011.”
Overall, Long Island’s office market saw a slight increase in vacancy rates in the final quarter of the year, with a large drop in Class A vacancy rates offset by a significant boost in Class B vacancy rates. Overall vacancy rates increased slightly to 18.7 percent in the fourth quarter of 2010, a rise of 2.7 percent from overall vacancy rates of 18.2 percent in the fourth quarter of 2009. Class A vacancy rates dropped to 16.4 percent this quarter, a decrease of 13.7 percent from Class A vacancy rates of 19.0 percent the previous quarter. Class B vacancy rates rose to 20.7 percent during the same time period, an increase of 17.6 percent from Class B vacancy rates of 17.6 percent at year-end 2009.
Long Island eked out an increase in overall asking rental rates in the final quarter of the year. Overall rents grew to $25.59 per square foot in the fourth quarter of 2010, an increase of 2.3 percent from overall rates of $25.01 per square foot in the fourth quarter of 2009. Class A rents dropped to $27.47 per square foot this quarter, a decrease of 3.1 percent from Class A rents of $28.34 per square foot the previous quarter. Class B rents throughout Long Island increased to $24.16 per square foot during the same time period, an increase of 8.3 percent from Class B rates of $22.31 per square foot at year-end 2009.
Nassau County presented a mixed picture at year-end 2010 as the submarket saw a significant decrease in vacancy rates for Class A office space but recorded a large increase in vacancy rates for Class B space. The county’s overall vacancy rate fell to 18.1 percent in the fourth quarter of 2010, a decrease of less than one percent from the overall vacancy rate of 18.2 percent in the fourth quarter of 2009. The submarket’s Class A vacancy rate dropped to 16.6 percent this quarter, a decrease of 16.2 percent from the Class A vacancy rate of 19.8 percent the previous quarter. Nassau County’s Class B vacancy rates increased to 19.4 percent during the same time period, rising 15.5 percent from Class B vacancy rates of 16.8 percent at year-end 2009.
Despite the decrease in vacancy rates for Nassau County’s high-end buildings, average asking rental rates for Class A buildings dropped slightly to $28.32 per square foot in the fourth quarter of 2010, falling 1.2 percent from Class A rents of $28.67 per square foot one year earlier. The submarket’s Class B buildings saw rates rise to $26.06 per square foot this quarter, a 6.8 percent increase from Class B rents of $24.40 per square foot the previous quarter.
The most notable deals of the year in Nassau County were Stallae International’s lease of 111,000 square feet at 1111 Marcus Avenue in Lake Success; Comforce International’s lease of 35,000 square feet at 999 Stewart Avenue in Bethpage; and the Winthrop University Heart Institute’s lease of 33,000 square feet at 1401 Franklin Avenue in Garden City.
Suffolk County also saw a major decrease in vacancy rates for Class A office space and a large increase in vacancy rates for Class B space. The county’s overall vacancy rate rose to 19.8 percent in the fourth quarter of 2010, an increase of 2.6 percent from the overall vacancy rate of 19.3 percent in the fourth quarter of 2009. The submarket’s Class A vacancy rate dropped to 16.2 percent this quarter, a decrease of 15.2 percent from the Class A vacancy rate of 19.1 percent the previous quarter. Suffolk County’s Class B vacancy rates increased to 22.6 percent during the same time period, rising 16.5 percent from Class B vacancy rates of 19.4 percent at year-end 2009.
As with Nassau County, Suffolk County saw average asking rental rates for high-end space in the market decrease, while rates for the county’s Class B buildings increased. Rents for Class A buildings in Suffolk County dropped to $26.03 per square foot in the fourth quarter of 2010, falling 5.8 percent from Class A rents of $27.63 per square foot one year earlier. The submarket’s Class B buildings saw rates rise to $22.05 per square foot this quarter, an 11.1 percent increase from Class B rents of $19.85 per square foot the previous quarter.
The largest leases of the year were spread throughout Suffolk’s three submarkets. In Eastern Suffolk County, the Internal Revenue Service completed a renewal and expansion for 102,000 square feet at 5000 Corporate Court in Holtsville. During the third quarter, the IRS would again lease 37,000 square feet at the same asset. In Central Suffolk, Royal Insurance subleased 50,000 square feet at 1 CA Plaza in Islandia. The largest deal of the year in Western Suffolk County was Marchon Eyewear’s
leasing of 76,000 square feet at 201 Old Country Road in Melville. Since the year began, financial services, government, and insurance have been the most active industries in the County as it relates to leasing.
Jones Lang LaSalle is a leader in the New York tri-state commercial real estate market, with more than 1,600 of the most recognized industry experts offering brokerage, capital markets, facilities management, consulting, and project and development services. In 2009, the New York tri-state team completed approximately 21 million square feet in lease transactions, concluded property sales transactions valued at more than $1.75 billion, managed projects valued at more than $4 billion, and oversaw a property and facilities management portfolio of 76 million square feet.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with approximately $40 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com
