A solid quarter it’s been! Continuing our quarterly market reports, in this article we will provide you with Long Island’s commercial real estate market report for the third quarter of 2016. As always, this report will include Long Island’s retail, office and industrial markets. To most easily digest this information, we will break it down simply by market with a focus on vacancy rates, rental rates and cap rates.
First up is Long Island’s Retail Market. The Nassau and Suffolk retail market experienced a positive change in retail market conditions from the second to the third quarter of 2016. The vacancy rate decreased from 3.8% in the second quarter to 3.6% at the close of the third quarter. Over the past four quarters, the retail market has seen an overall steady decrease in the vacancy rate, which suggests a healthy and secure market. As for rental rates, they have increased from the second quarter ending Q3 with rental rates at $25.75 per square foot. This represents a relatively substantial increase of 2.2% in rental rates in the third quarter. When rental rates are up and vacancy rates are down, this proves to be a very positive relationship for Long Island’s retail market. Regarding cap rates, the retail market cap rates have been lower in 2016, averaging 6.15% compared to the same period in 2015 when they averaged 6.70%.
Next we’ll look at Long Island’s Office Market. Here at the end of Q3, we again see that positive relationship with the vacancy rate down and rental rates up. The vacancy rate in the Nassau and Suffolk County office market decreased from 7.8% at the end of the second quarter to 7.4% at the end of the third quarter. Over the past four quarters, the vacancy rate has overall been on a steady decline. This decreasing trend is a sign of a healthy office market and Long Island job market. Rental rates are up over the previous quarter ending the third quarter of 2016 with rates at $25.73 per square foot. This represents a 1.1% increase in rental rates from the end of Q2 where rental rates were reported at $25.45 per square foot. As for cap rates, the office market cap rates have been higher in 2016, averaging at 9.19% compared to the same period in 2015 when they averaged at 6.81%.
Last we have Long Island’s Industrial Market where we see a minimal yet positive change. The Nassau and Suffolk County industrial market ended the third quarter of 2016 with a vacancy rate remaining at 3.0%. However, over the past four quarters we’ve seen a relatively steady continual decrease in the vacancy rate for the industrial market, encouraging a healthy and stable industrial market here on Long Island. As for rental rates, the third quarter of 2016 ended with an increase in rates at $10.20. This represents a 2.2% increase in quoted rental rates from the end of Q2 2016 when the rental rate average was reported at $9.98 per square foot. Lastly, the industrial market cap rates have been much higher in 2016, averaging 18.00% compared to the majority of 2015 when they had averaged 8.04%.