In this article we will provide you with Long Island’s commercial real estate market report for the fourth and final quarter of 2015.
We will cover the activity and statistics of 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. Overall, Long Island’s commercial real estate (CRE) markets showed strength throughout 2015, proof of a recovering Long Island economy.
First, breaking down Long Island’s Retail Market, the Nassau and Suffolk retail market experienced minimal change in the market conditions in the fourth quarter of 2015. The vacancy rate fell from 4.1% in the third quarter to 4.0% in the fourth quarter. Throughout 2015, the retail market saw an overall decrease in the vacancy rate, another proof-point of a recovering economy, with the rate decreasing from 4.4% at the end of Q1 2015, to 4.2% in Q2 2015, 4.1% at the end of the third quarter, and to 4.0% in the fourth quarter of 2015.
As for rental rates, they had decreased from the third quarter of 2015 ending at $24.97 per square foot for the fourth and final quarter of 2015. This represents a very small decrease at 0.2% in rental rates for the fourth quarter, and a 2.96% increase from Q4 of 2014. Although rental rates did decrease, it was ever so slightly. This is a positive sign for the retail market.
Regarding cap rates, cap rates had been lower in 2015, averaging 6.44% compared to the same period in 2014 when they averaged 7.08%.
Next, we look at Long Island’s Office Market where we saw slight positive change in Long Island’s office market in the fourth and final quarter of 2015. The vacancy rates in the Nassau and Suffolk County office market decreased from 8.9% to 8.8% at the end of the fourth quarter 2015. The vacancy rate was at 9.0% at the third quarter, 9.4% at the second quarter, and 9.6% at the close of the first quarter of 2015. This decreasing trend is a sign of a healthy office market.
Rental rates are up over the third quarter ending the fourth quarter at $25.49 per square foot. This represents a 0.5% increase in rental rates from the end of the third quarter, when rental rates were reported at $25.37 per square foot.
As for cap rates, they have been higher in 2015, averaging at 7.99% compared to the same period in 2014 when they averaged 7.24%.
Lastly, we hve the Long Island Industrial Market. The Nassau and Suffolk County industrial market ended the fourth and final quarter of 2015 with a vacancy falling to 3.5%. This is a decrease from the third quarter of 2015 where vacancy rates were reported at 3.8%. Reviewing previous vacancy rates for 2015, in Q1 2015 vacancy rates were at 4.5%, in Q2 2015 vacancy rates fell to 4.3%, and in Q3 2015 rates fell even further to 3.8%. It appears that vacancy rates for Long Island’s industrial market are absolutely on a declining trend.
As for rental rates, they’re on the rise. The average rental rate for industrial space was $9.97 per square foot at the end of the fourth quarter of 2015. This
represents a 1.5% significant increase in quoted rental rates from the end of Q3 2015 when the rental rate average was reported at $9.82 per square foot.
Lastly, cap rates have been higher in 2015, averaging 8.47% compared to the majority of 2014 when they had averaged 7.73%.
For more quarterly updates on the state of Long Island’s commercial real estate markets, subscribe to our monthly newsletters.