US Office Market Softened while Long Island Office Market Trending towards Stability.
David Pennetta SIOR, CIBS, LEED GA
$100 million in transactions 2023. Executive Managing Director @ Cushman & Wakefield | Unlocking opportunities, maximizing returns, helping clients and customers as a trusted corporate real estate partner.
The office market is trifurcating: the best product is performing well with minimal vacancy, obsolete product may require investment or conversion, and the middle market faces a highly nuanced outlook with both opportunities and challenges in the years ahead.
The increase in sublease space is also slowing down as the amount of office space available for sublease increased 1.0%. The YOY increase of 4.3% is the slowest pace recorded since the Federal Reserve started increasing interest rates in March 2022 and the second slowest YOY increase since the end of 2019.
Long Island has had some external factors helping the numbers. The 1m SF CA Plaza Islandia, 170k SF 75 Maxess Rd Melville, 53k SF 560 Broad Hollow Rd Melville, 80k SF 1700 Walt Whitman Rd, Melville and 100k SF 125 Baylis Rd Melville properties have been or will be razed for Logistics or Multifamily Residential development. Also, the 77k SF 263 Old Country Rd Melville and the 235k SF 750 Woodbury Rd Woodbury office buildings were purchased by churches, Church of Scientology and Jehovah's Witness respectively. This accounts for over 1.7m SF coming off of the office supply.
Long Island traditionally has had a lower Beta in market moves as compared to the US as a whole. The confluence of constructions cots, interest rates, insurance rates and difficulty in getting employees to substantially return back to the office environment has made every move to recovery an arduous one.