As the se
cond quarter of 2015 recently came to a close we felt it would be helpful to craft for you a report consisting of the Long Island CRE market statistics for Q2 2015. In this report, we will cover the 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 CRE markets are showing stability proving that Long Island’s economy is strengthening.
First, let’s explore Long Island’s Retail Market – The Nassau and Suffolk retail market did not experience much change in the market conditions in the second quarter of 2015. However, it is important to keep in mind that stability is key in today’s CRE markets. The vacancy rate fell from 4.4% in the previous quarter to 4.2% in the current quarter. Over the past four quarters, the retail market has seen an overall decrease in the vacancy rate, another proof-point of a strong and growing economy, with the rate decreasing from 4.7% in Q3 2014, to 4.6% at the end of Q4 2014, 4.4% at the end of the first quarter of 2015, and to 4.2% in the current quarter. As for rental rates, they have increased from the first quarter of 2015 ending at $24.67 per square foot. This represents a 1.7% increase in rental rates in the current quarter, and a 2.47% increase from four quarters ago. Decreasing vacancy rates and increasing rental rates are positive signs in the retail market. Regarding cap rates, cap rates have been higher in 2015, averaging 7.00% compared to the same period in 2014 when they averaged 6.62%.
Next, we will look at Long Island’s Office Market - Similar to the retail market; there was little change in Long Island’s office market in the second quarter of 2015. The vacancy rates in Nassau and Suffolk Counties markets decreased to 9.3% at the end of the second quarter 2015. The vacancy rate was at 9.5% at the end of Q1 2015 and Q4 2014, and at 10.0% at the end of Q3 2014. However, rental rates ended the second quarter at $25.14, a decrease over the previous quarter. This represents a 0.4% decrease in rental rates from the end of this year’s second quarter, when rents were reported at $25.23 per square foot. Although we are seeing an increase, this change is minimal, and the office market is still showing strength. As for cap rates, they have been higher in 2015, averaging at 9.69% compared to the same period in 2014 when they averaged 5.88%. Truly, we are seeing a large increase in the cap rate here.
Lastly, we have the Long Island Industrial Market - The Nassau and Suffolk County industrial market ended the second quarter of 2015 with a vacancy rate of 4.4%. This is a decrease from the first quarter where vacancy rates were at 4.5%, in Q4 2014 vacancy rates were at 4.5%, and at the end of the third quarter of 2014 vacancy rates were reported at 4.7%. It appears that vacancy rates for Long Island’s industrial market seem to be on a declining trend. Regarding rental rates, the average rental rate for industrial space was $9.92 per square foot at the end of the second quarter of 2015. This represents a 0.6% increase in quoted rental rates from the end of Q1 2015 when the rental rate average was reported at $9.86 per square foot. Another sign of a strengthening industrial market here on Long Island. Lastly, cap rates have been lower in 2015, averaging 6.75% compared to the first three months of 2014 when they had averaged 7.56%.
