MELVILLE, NY—Continued strong transaction volume and little new product being delivered, combined to further reduce Long Island‘s industrial vacancy rate to just 3.6% at the end of the first quarter of this year.
Brokerage firm JLL reports that Long Island’s industrial vacancy rate decreased 80 basis points from 4.4% one year ago. The average asking rental rate for Long Island industrial properties rose 16.6% to $10.96-per-square-foot in the first quarter of 2015 from $9.40-per-square-foot one year ago.
“Several big-name, ‘on-tarmac’ tenants at John F. Kennedy International Airport have leases expiring in 2015 and are in negotiations with the Port Authority of New York and New Jersey,” says Reid Berch, senior vice president with JLL’s Long Island industrial team. “These companies are also considering offers from the private sector, giving them unprecedented leverage in discussions for financial incentives and upgrades to existing facilities. Whatever direction the negotiations take, the market will benefit from the rehabilitation of older antiquated buildings both on and off the airport.”
The continued reduction in Long Island’s industrial inventory drove down leasing activity by approximately 46% in the first quarter as compared with volume in the final quarter of 2014. The market witnessed approximately 470,000 square feet of industrial transactions in the first quarter of the year compared with 877,443 square feet in the last three months of last year.
Industrial construction activity is mainly focused on Suffolk County, with three pharmaceutical facilities undergoing expansion totalling 270,000 square feet of space. InvaGen Pharmaceuticals Inc. is constructing a 125,000-square-foot building and AlphaMed Bottles Inc. is building a 70,000-square-foot facility, both located on Carlton Avenue in Islip on an 18-acre parcel owned by the town. In addition, Centereach-based Spirit Pharmaceuticals LLC is consolidating into a 75,000-square-foot facility under construction in the Islip Foreign Trade Zone.
Other Suffolk County projects underway include the Class B, 40,000-square-foot 17 North Belle Mead Road in Setauket, with occupancy by Islandaire planned for the second quarter of 2015; and the 60,000-square-foot 220 Roger’s Way, the first industrial building at Hampton Business District in Westhampton Beach, which is 15% leased to AC Lighting & Electric Supplies.
The Long Island industrial market posted 73,000 square feet of positive net absorption in the first quarter of the 2015. Suffolk County attracted the most activity of all Long Island submarkets, registering more than 245,200 square feet in completed transactions in the first quarter compared with 524,080 square feet in the previous quarter, JLL reports.