The industrial market continues while the office market progresses slightly

Long Island’s industrial real estate market continued to see strong activity in the second quarter, with the recently sluggish office market also showing signs of improvement.

Industrial rents hit a record high in the second quarter, with the overall average rent hitting $14.59 per square foot for the first time, according to a report from Cushman & Wakefield. This represents a 33.5% increase from just two years ago.

Industrial leasing activity soared in the first half of 2022. There were 2.1 million square feet of Long Island industrial space leased in the first six months of the year, an increase of 55, 9% from the first six months of last year, according to C&W.

Two of the largest industrial leases in the second quarter were the 115,000 square foot lease signed by Lindenmeyr Munroe at 158 ​​Candlewood Road in Bay Shore and the 76,000 square foot lease at 1 Brooklyn Road in Hempstead by The Brink’s Company.

While industrial vacancy rates increased slightly in the second quarter, vacancy rates were still historically low at 2.5%.

Meanwhile, Long Island’s office real estate market, which has struggled since the start of the pandemic, had a fairly active first half. There were 809,000 square feet of office space on Long Island leased in the first six months of the year, a 34.4% increase over the same period last year, C&W reports.

The 490,000 square feet of office space leased in the second quarter represented the largest leasing volume since 2016. The largest transaction in the second quarter was a 152,000 square foot lease by Signature Bank at 68 S. Service Road in Melville.

Although the overall office vacancy rate climbed to 13%, rents rose slightly in the second quarter, with the overall average rent reaching $32.06.

The bad news in the Long Island office market is the continued negative uptake rate, which is more than 500,000 square feet in the red so far this year. Office supply has exceeded demand for 11 consecutive quarters, with the last positive uptake being in 2018.

But Cushman & Wakefield broker David Pennetta sees an additional positive trend in the office market, which is coming directly from landlords.

“During the pandemic, when a tenant came back and said to give us a one-year extension, the landlords were happy to oblige. Now most require a normal term lease while increasing rents,” says Pennetta. “The vacancy rate subset data for Class A and Class B offices with available vacancies of 50,000 square feet or more, where the vacancy rate is 1.75%, is also very high. revealing. These large users have been slow to commit to new leases despite ongoing and pending lease expirations, but after a few of these larger tenants sign new leases, there will be a further increase rents.

Jose C. Birney