A handful of New York City companies have opened outposts in recent months on Long Island, fueling optimism among landlords and brokers that newcomers will help the market recover from COVID-19.
The pandemic has dragged down demand for office space in the city and on the island, with the economy reeling and many industries instructing staff to work from home. The amount of workspace available for lease grew 15% on Long Island from March 2020 to 2021, according to CoStar, an international commercial real estate analytics firm.
Further, commutes that don't rely on mass transit, floor plans with fewer elevators and relatively cheaper rents have mostly drawn in smaller companies. These newcomers along with one bigger firm — the accounting company Anchin, Block & Anchin — have claimed at least 19,270 square feet of office space, a fraction of the 9.95 million square feet available across the island, according to CoStar. But brokers and owners say these moves underscore the suburban markets' appeal, which may lure in more large companies.
"What we’ve got are these smaller offices that may be a little bit more nimble — able to come out and improve the quality of life for their employee base," said Craig Weiss, president of T. Weiss Realty Corp., which owns 500,000 square feet of office space in Melville.
Leases signed over the past three months have helped Weiss fill about half the vacancies that have emerged since COVID-19 hit. He estimates the company's four office buildings were 95% occupied until the pandemic struck, which dropped to 90% occupancy — though it's now back up to about 92.5%.
The realty signed five year leases with two city firms opening second offices and three relocating at least a portion of their workspace to the island, including DNA Valuation Management, an appraisal management company.
Duane Davis decided to move his appraisal firm, Sielken Davis LLC, to Melville, where he also launched DNA Valuation Management with partner Claudia Adamo when his lease expired in Queens. Appraisal management companies act as buffers between banks and appraisers, and have become widespread since the 2008 housing crash.
Nearly a decade ago, Davis moved Sielken Davis from Williston Park to Queens because employees commuted from various corners of the city. He is no longer focused on the city's hiring pool, and hopes to staff DNA's office with up to 15 employees as it becomes safe to do so.
"There’s just a frenzy to move to Long Island, so I don't think we’re going to lose out," said Davis, of Dix Hills. "People will be more into shorter commutes, being closer to home, child care [flexibility] and all the other things that COVID opened us up to."
In Melville, Davis and Adamo can also afford class A office space near banks, mortgage firms and other prospective clients.
The median asking price per square foot of office space is $29 on Long Island, compared with $71 in New York City, according to CoStar.
Brokers and landlords said they expect larger companies weighing suburban outposts to start making decisions near the end of 2021. Subleases may be a particularly attractive option for large companies, said Amanda Gorozdi, senior associate at commercial real estate services firm Avison Young. She compared company executives weighing workspaces to students deciding which college is worth their investments.
"Don't spend all your money going to a top tier private school when you don't know what you want to do," she said. "A lot of companies are still uncertain … Are we going to spend all this money on something when maybe employees are going to still be working from home?"
Anchin, which has about 400 employees, opted to sign a two-year sublease in Uniondale because it may outgrow the 11,000 square-foot office opened this February, associate managing partner Marc Newman said.
After a fire damaged part of Anchin's workplace in Manhattan, the company saw an opportunity to seek space closer to employees and clients, Newman said. He estimated that at least one-third of staff live on Long Island or in Queens.
"The goal is that we're on the island; we're going to stay on the island," said Newman, of Rockville Centre. "We just don't know if the space is going to be enough."
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