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Long Island Won't Be New York's Industrial Release Valve For Long

Long Island’s industrial sector has been on a firm growth trajectory since the recession, positioned as the alternative to Brooklyn and Queens. But the growth isn’t going to last forever, and not because the demand is not there — the land isn’t.


2016 was the strongest year for the industrial market on Long Island in more than a decade. Asking rents rose above $11/SF for the first time in Q3, according to JLL, up 5% from the summer.

Investment sales prices jumped as well: the average sale in Q3 clocked in at $95/SF, JLL's research shows, an enormous, 22% leap over earlier in the year. The quarter also had the highest sales numbers recorded since the recession.

Rechler Equity Partners managing partner Gregg Rechler, one of the most prolific commercial and industrial developers on Long Island, told Bisnow today that his firm's portfolio is at 98.6% occupancy, the highest it's ever been in his 30 years in the business.

"The overall market is really super strong," Rechler said. That's him on the left, with his partner and cousin, Mitchell Rechler. "It’s a pretty deep market, and most people don’t understand the scale of it."

Rechler said there's about 155M SF of industrial real estate on Long Island, two-thirds of which is in Suffolk County, with the rest in Nassau County. According to JLL, vacancy in all of Long Island industrial is less than 2%.

But there isn't land to build more product. There's only one industrial site ready for development on Long Island, and Rechler Equity Group's got it.


The firm is developing a 440k SF mix of industrial and office uses in Westhampton (rendered here), repurposing an old airport. Rechler acquired the site from the Suffolk County government. The groundbreaking should happen early this year, he said.

"We're the only industrial park that's zoned and shovel-ready on all of Long Island," Rechler said. "There’s very little land on Long Island that’s available for development."

For years, industrial users who have been priced out of New York City have flocked to Long Island as a cheaper alternative. Rechler sold an industrial property to Diamond Sugar for more than $90/SF — a price that would make many industrial markets in the country envious — after Diamond sold its industrial property in Brooklyn for more than $600/SF to a residential developer.

“The demand for industrial real estate on Long Island is unlike anything we’ve experienced before,” Mitchell Rechler said in the company's Q2 report. “Our occupancy rates have never been higher, leases are being filled more than a year in advance and properties no longer fitting within our portfolio profile are selling quickly." 

This trend can't continue for long. Its ripple effects will be widespread, and a boon for markets like Westchester County, New Jersey and Connecticut. Those jurisdictions might not be first on a prospective tenant's list, but soon they might have no better options if they want to be in the Tri-State region.

"I think it goes to the surrounding markets within a 50-mile radius," Gregg Rechler said of the pent-up demand, "and then the radius gets wider."