Long Island Market Watch
4th Quarter 2017
The year 2017 ended with good news and bad news. The stock market stayed on its upward course, unemployment hit all time lows and inflation remained in check. That’s the good news. The bad news is the economy grew by only 2.3% for the year. That placed the 2017 GDP at the median of the last 20 years, (10th). This mediocre economic growth for the 4th quarter was exemplified by the US vacancy rate for office buildings holding steady at an anemic 9.4%. This was also the average US office vacancy rate for the year. Rental rates rose marginally to an average rent of $25.15 per square foot. Absorption remained positive for the 4th quarter in a row. (Positive absorption indicates that more space was leased in 4Q 2017 than new space became available during that period.)
The Long Island economy remained relatively strong with unemployment holding steady at 4.2%; led by the healthcare and hospitality industries. This was consistent for the year which averaged 4.4% unemployment. Business confidence and consumer spending also remained strong for the Island.
This positive economic news resulted in the Long Island office market remaining ahead of the national curve at 7.1% vacant. Thus, Long Island’s office market is one of the strongest suburban office markets in the country. The average quoted asking rent remained at $25.68 psf keeping the 4th quarter consistent with the 2017 annual average of $25.44 psf.
This quarter was marked by numerous sales of large office buildings on Long Island. Nine buildings over 100,000 square feet changed ownership. The total square footage of these buildings was 2,000,000+ and the combined value of sales prices was $379,000,000. This equates to an average price of $189.00 per square foot. One of the larger buildings that sold was the 250,000 square foot Parkway Plaza. This building, located at 1400 Old Country Road in Westbury, is also known as the Barnes & Noble Building because it is the location of the Barnes & Noble Long Island headquarters. The purchaser, Valley East, quickly invested capital into improvements to bring the property up to its potential as a Central Nassau County “Class A” office building. This wise investment brought the building from 40% vacant to its present state of 12% vacant, proving once again that, “If you build it, they will come”.
Ross Selinger, MCRE, MID – President, Selinger Enterprises, Inc./ITRA Global