“How’s the commercial market doing?” is the question I am most often asked. The answer is different for each national CBD. Many cities with suffering industries have seen their occupancy rates dwindle. This has driven the vacancy rate for the country to 12.8% reflecting a 13.3% increase from it’s low of 11.5% in 2007. The driving factor, as always, is unemployment – layoffs mean vacant space. The 10% unemployment rate has been the downfall of the national commercial office market.
Long Island on the other hand has not seen such wild fluctuations. The vacancy rate has remained relatively stabile between 8 – 10% for the last 7 to 8 years. First Quarter 2010 has seen the vacancy rate drop to 8.1% reflecting a 15.6% decrease from it’s high of 9.6% in 2007. A contributing cause is unemployment remaining at 7.6% approximately 25% below the national average. This is due to Long Island’s office space being occupied primarily by service companies, the strongest sector in today’s economy.
Some, but not all, of Long Island’s landlord’s have become very aggressive to compete for the available quality tenants. This has been based on a building to building scenario. Full buildings have been cavalier keeping their rents high while buildings with large vacancies are reducing rents, increasing concessions and upgrading workletters to compete.
Another problem is buildings that have fallen “under water”. This means the mortgage is coming due and the value of the building has fallen below the remaining balance. This is placing the buildings in limbo until the owner and the bank work out a settlement. Thus affecting the building’s stability, it’s services and the necessary cash for new tenants work and brokerage. These situations will eventually work themselves out because the banks don’t want to manage buildings. Until that happens the tenants suffer. There are a variety of remedies for companies facing this type of predicament. Contact me, your local tenant advocate, to discuss solutions such as non-disturbance, offset rights and lease audits.