Inside Long Island Business

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LI office market makes 'very, very slow' recovery

534 Broadhollow Rd. in Melville, owned by CLK

534 Broadhollow Rd. in Melville, owned by CLK Commercial Properties in Woodbury. A lease signed in May brought the building to 100 percent occupancy, as office landlords across Long Island report an uptick in leasing activity, according to a CBRE second-quarter report. (Credit: Handout)

This spring Long Island’s office market had its best three-month period in nearly five years, CBRE reported.

Taking into account all the space newly rented and all the space vacated, the total amount leased – referred to as positive net absorption – increased by 124,000 square feet, according to a second-quarter report by the brokerage. That was the highest positive net absorption since late 2007, CBRE reported. Long Island has a total of nearly 41 million square feet of offices.

Office tenants leased 662,000 square feet from April through June, 28 percent more than the average of the last five years, the brokerage firm reported.

The uptick is due mostly to the expansion of existing businesses, rather than new firms relocating to Long Island, according to CBRE.

“It’s not too difficult to have a relative improvement when you come off a poor year like last year,” said Martin Lomazow, a senior vice president at CBRE in Woodbury.

Even so, he said, tenants are “increasingly confident in the market and in their own businesses, so they’re stepping out and making long-term commitments, and some are making measured expansions.”

Others are still downsizing, he added. “We’re still in a recovery mode from the 2008 recession,” he said. “Each year seems to be improving at a very, very slow but steady pace on Long Island.”

Last year, many tenants were either negotiating for rent discounts or cutting back on space, said Craig Koenigsberg, founder and principal of CLK Commercial Properties in Woodbury, which owns 2.5 million square feet of offices on Long Island, mostly in Melville and Lake Success.

By contrast, this year tenants are renewing leases and in some cases seeking more space, he said: “They must see some possibility of traction in order to be feeling comfortable about their rents and maybe expanding a little bit.”

One notable expansion was Hain Celestial Group’s move from 35,000 square feet in Melville to more than 86,000 square feet in Lake Success, according to CBRE.

Not all the news was good for office landlords, though; part of Hain’s new home was formerly occupied by AXA Advisors, which downsized from 62,000 square feet in Lake Success and Melville to 44,000 square feet in Woodbury. Also, Northrop Grumman will be leaving its nearly 98,000-square-foot space in Bethpage next year.

The Island’s office availability rate was 15.8 percent this spring, 2 percentage points lower than spring 2011 and the lowest in more than three years, CBRE reported.

Landlords were asking annual rents of about $26 per square foot in the spring, an increase of 45 cents compared to the previous spring, according to CBRE. Asking rents have been roughly unchanged for seven quarters.

 

Pictured: 534 Broadhollow Rd. in Melville, owned by CLK Commercial Properties in Woodbury. A lease signed in May brought the building to 100 percent occupancy.

 

Tags: commercial , real estate , office , CBRE , CLK Commercial Properties

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