JLL: 'Cause For Concern' In Long Island's Stagnant Office Market
Long Island's office market was hit by consolidations in the third quarter, driving vacancy up.
The 70-basis-point increase in vacancy from the second quarter was entirely made up of newly available subleases, exacerbated by the total lack of new construction deliveries in the quarter, according to a JLL report. The vacancy rate for Western Nassau County sits at 2.9%, with Class-A vacancy under 3% for the first time in a decade.
Class-B office in Western Nassau also saw 110K SF of positive net absorption in the third quarter, bringing its vacancy rate down to 8.5% from the 12.2% it registered in Q2.
Eastern Nassau County saw a notable departure when telecom company Altice USA relocated its headquarters from Bethpage to Long Island City in Queens, while also consolidating employees from three other satellite offices. All told, the company made 450K SF available for sublease, outweighing the sum total of Eastern Nassau's positive absorption by 27%.
Central Nassau saw the most leasing activity in the third quarter of what has been a down year, accounting for 70% of Long Island's leases over 10K SF in the quarter. The scarcity of medium and large blocks of space all over the island made Central Nassau one of the few areas where companies — like Nationwide Insurance and Centers Plan, whose new leases totaled 31K SF at 990 Stewart Ave. in Garden City — could find new offices. Central Nassau's Class-A vacancy rate dropped 300 basis points from Q2 to Q3.
One of the biggest blocks of newly available space is at 265 Broadhollow Road in Melville, where Capital One vacated 131K SF to consolidate offices at 1307 Walt Whitman Road across town. Still, overall negative absorption for Nassau County stood at 51K SF for the quarter, which pales in comparison to the 272K SF that went back on the market in Suffolk County.
The disparity between the two counties is a reversal of year-to-date trends, as Suffolk had seen positive net absorption through the first half. So far, Suffolk's total net absorption this year is negative 63K SF, while Nassau's is negative 131K SF.
Despite the givebacks, rent has remained steady since the beginning of the year due to the reliance on subleases this quarter and the lack of Class-A office space blocks of real size. JLL noted in its report that the Class-A vacuum, combined with the total lack of new construction in the pipeline, is "cause for concern."