According to numerous economists, the economy is finally showing signs of bottoming out. They point to corporate earnings, stabilizing job losses, and increasing consumer confidence as evidence. On the other hand, continuing high unemployment and declining home prices is proof that the ensuing recovery will be slow. The national office market is following suit as evidenced by the 2nd Quarter 2010 vacancy rate stabilizing at 12.9%, the same as the previous quarter. Furthermore this quarter had positive absorption (more space has been leased than has become available). Positive absorption is the first step to rising rental rates. However, the average rental rates have not yet followed suit and are continuing to decline. This is evidence of landlords continuing to negotiate aggressively to do deals.
The Long Island economy is lagging behind the national economy by still not showing signs of bottoming out. This is evidenced by unemployment rising, sales tax revenues sinking and home prices continuing to fall. The Long Island office vacancy rate for 2Q 2010 has risen to 8.4% and rents have dropped to $25.76. The LI market did have positive absorption for this period. On the other hand, office building sales have dropped to 2005 levels at an average price of $126.00 PSF for 2010.
Thus, the Long Island economy/ office market is still softening and landlords are still negotiating aggressively. This is an opportune time for tenants and buyers to negotiate their leases or purchases. Act now, even if your lease does not expire for 2 to 3 years. It’s only a matter of time before the Long Island economy follows the national economy and does bottom out.