Tenant’s Guide | First Quarter 2013

As one would expect, each quarter is a near “mirror image” of the previous quarter. There has not been any significant change in the economy that would have an effect on the Long Island real estate market. The leasing and sale activity has continued at a similar pace, over last quarter, with a slight but insignificant increase in activity. The transactions continue to take an inordinate amount of time to complete. If the market has stabilized then it is safe to assume we may begin to see an increase during the next few quarters.

Landlords, wrestling with the market and their property/portfolio balance sheets have been seeking to add value with minimal results. Although we have begun to see some small increase in asking rents, rent concessions and tenant’s improvements have helped to offset the increase. As long as sublease opportunities continue to hit the market the landlord’s ability to increase rental rates will be undermined. The office leasing sector has continued with a near zero absorption (as space is leased more hits the market). The sublease market has stabilized to some degree with old space being subleased as the newer units hit the market. The industrial sector continues to outperform the office sector. Most of the economists on Long Island have forecast 2013 to be another difficult year with minor overall improvement in the commercial real estate market.

The changes from last quarter have been minor, so there have not been widespread adjustments in the asking rents. Rental concessions continue to be an area Landlord’s have shown a willingness to offer as an inducement. Sublease space continues to cause some overall vacancy rates to remain higher than our market is accustomed to. Recovery continues to be a slow as direct space and sublease space continues to enter the market.

Major Transactions

Tenant Size Type Lease/Sale
Broadridge Financial 700,000 sf Office Lease
Onyx Equities 235,000 sf Office Sale $123/sf
495 Holdings 25 acres Land Sale $255,000/acre
NY Community Bank 160,000 sf Office Sale $75/sf
Wal-Rich Plumbing 50,500 sf Industrial Sale $91/sf

Market Trends

  • Slow recovery to continue with little upside potential for the beginning of the second quarter of 2013
  • Asking rents may increase slightly although offset by increased rental concessions

Vacancy Rate

Vacancy Rate

Tenant’s Perspective

Sensing that the market may begin to rebound, tenants have begun to lock into longer term leases under more favorable conditions. The short term extensions of one or two years have lost their financial attractiveness. As Landlords compete for specific tenants, the negotiations may not always result in lower rent, as Landlords are still held accountable to pro-formas set by their lenders. But they can often result in greater concessions, in the form of free rent or tenant improvements. Providing the tenant can demonstrate superior credit they will still be able to drive the economics in their favor.

Average Rental Rates

Suburban Class A $27.21/sf
  Class B $24.84/sf

 

It’s a science…

If you’re coming to me looking for space, it might be too late for me to help you!

The acquisition of space is merely the result of a carefully planned, methodically executed analysis of all of the elements that affect your business and its future operation.

The acquisition of space is merely the result of a carefully planned, methodically executed analysis of all of the elements that affect your business and its future operation. Yes, I admit the final decision is usually an emotional one, something from the gut or even enee menee mini moe but the evaluation of all the factors leading up to that point, bringing you to the “short list” of alternatives that best fit the needs of the firm is a Science!

So when someone says to me: “I need this much space in such and such a place, for this much money” I resist the temptation to say: “ok, I’ll be right back with a list”, I prefer to ask “Why?” I think you would be very surprised with the answers you get. Rarely will someone say: “because this is the result of a careful planning study”.

I can’t tell you how many times my brokers have come to me saying: “But I found them exactly what they asked me for and they took something totally different (with another broker)!”  Today, it’s not about have I got space for you, or I have the perfect deal, it’s about service and it’s about science and it’s about advanced planning. We want to help you understand where you need to be, where your employees are, where your competitors are and where you should be in the years to come.

So, when I call and introduce myself as a real estate broker, I’m not calling to sell you space, I’m calling to sell you our professional services. Let’s take a look, years in advance and begin to set up the corporate strategy so that when you do need space, we know why.  We have a plan, we know what we are looking for and we are prepared to act quickly when we find it.