“It’s Déjà vu all over again” as Greenspan has once again begun to raise interest rates. His intent is to hold back future inflation and the surging economy which remains at approximately 4% GDP. Increasing corporate profits, consumer confidence, income and spending are driving this economy.
Adding almost 1M jobs in the last six months, America’s growing companies impacted the national office market by absorbing 6.3M square feet in the last quarter. Unfortunately, the national vacancy rate has held steady at 16.8% due to builders adding 6M square feet of new construction.
Long Island continues to gain jobs faster than the rest of the country by keeping its’ unemployment rate near 4%. LI’s job boom is being driven by growth in the education, health, leisure, hospitality and retail industries. This job growth has reduced LI’s office vacancy rate down to 9%, one of the lowest in the country, representing two straight quarters of decreasing vacancy rates for LI.
Although vacancy rates have dropped, LI office rents are holding steady at $23.55 PSF. This is because available sublease space and shadow space continues to compete with landlords. This won’t last as office rents are projected to SPIKE due to increasing demand and rising costs, i.e., fuel, taxes and interest rates. Smart companies foresee this trend and are locking in today’s low rental rates. They are recognizing “Déjà vu, before it happens all over again”.