According to Ross Selinger, President of Selinger Enterprises, and the Long Island Affiliate of ITRA Global, the national office market continues to be strong, driven by the economy’s slow but steady recovery. This is evidenced by the third quarter’s surprising 3.9% GDP, unemployment decreasing to 5.8% and the strong stock market. Low energy costs have held inflation down and the Fed is keeping interest rates low. The only negative is the housing market remaining soft.
This solid economic news is having a positive impact on the national office market. The evidence is the average vacancy rates decreasing to 11.2%, net absorption continuing its positive trend and rental rates rising to $23.38 psf.
However, the 3rd Quarter Long Island office market has bucked that trend and declined for the first time since 2009. This is due to the Long Island economy remaining sluggish. The unemployment rate dropped to 4.8% due to the declining labor force. Sales tax receipts for Nassau and Suffolk Counties dropped by -4.9%, (below the NY state average of +2.88) indicating poor consumer spending. Residential sales and prices remain flat.
Not surprisingly, the impact of these poor economic stats on the Long Island office market is negative. Vacancy rates have risen for the first time since 2009 to 9.9% and net absorption is once again negative. Average rental rates remain the contrarian rising to $25.35 indicating landlord’s recognition of this economy as the “new normal”.
The national office markets are being driven by the spiking demand of the millennials and the energy industry for office space in the country’s major cities. Long Island and other suburban communities remain stuck in the past and are not willing to accept the necessary changes to attract a young workforce. Until this happens, Long Island will continue to be out of sync with the national office market.
However, the silver lining is the ability of suburban office tenants to keep their occupancy costs low by aggressively negotiating in this favorable tenants market. The best method to achieve that goal is by using a tenant representative with no conflicts-of-interest who focuses solely on tenant’s needs.
Ross Selinger, President of Selinger Enterprises, Inc. and past Vice Chairman of the International Tenant Representative Alliance (ITRA Global), has been Long Island’s leading tenant advocacy firm since 1996. ITRA Global is an organization of real estate professionals specializing in representing tenants and buyers in the leasing, acquisition and disposition of office, industrial and retail facilities. With coverage in major markets around the world, ITRA Global is dedicated to representing tenants and occupiers of commercial real estate. Clients benefit by having an experienced professional as their trusted advisor, providing conflict-free representation with total objectivity.
To learn more about Long Island office market contact Ross M. Selinger, MCRE, MID at +1.516.222.7974, or by email at *protected email*