It’s the “best of both worlds” for the national economy. Low interest rates coupled with low inflation drove the 2004 GDP to a solid 4.4% with the stock market rising to near 2000 levels. Driven by consumer, business and government spending, businesses are enjoying exceedingly strong earnings, cash flow and profit margins. Thus causing hiring to finally gather steam in 2005.
All of this positive economic activity has at long last impacted the national office market, reducing the vacancy rate to 15.1% and increasing asking rents to $22.30 PSF.
Long Island has gone to the head of the economic pack with a 3.6% unemployment rate. This is due to growth in the service-producing industries i.e. professional, business, education, health, leisure and hospitality. The Long Island office market has followed suit by producing an amazingly low vacancy rate of 8.5%, the lowest in the country. Equally important, the average rental rate has risen to $25.42 PSF.
Merriam-Webster defines spike as “1: a very large nail, 2: any of various pointed projections”. In commercial real estate a spike describes the projection on a graph when landlords suddenly and drastically raise rental rates. They do this when their office vacancy rates reach 5 to 6 percent, also known as the point of diminishing returns. Long Island is quickly approaching that point of low vacancy rates and spiking rental rates. Unfortunately for Long Island companies this will be “the worst of both worlds”.
– Ross Selinger