Economists report that this is a very positive sign from an economic point of view. New job creation in the region will heighten demand for office space. Typically, one new job translates into 200 square feet of space, brokers said.
Cushman reported the vacancy rate for Long Island's 29-million square feet of office space fell to 10.6 percent, the lowest in three years. The vacancy rate stood at 12.4 percent at the end of the second quarter, and at 15.1 percent a year ago. Since the end of the second quarter, Cushman added about 300,000 square feet to the figure it uses for Long Island's office space inventory, reflecting buildings that have come online in Lake Success and Melville.
Moreover, the brokerage reported that year-to-date net absorption — the amount of vacant space leased, minus the amount of new space coming on the market — stood at 973,000 square feet, compared with only 70,000 square feet for all of 2003 and a negative 220,747 square feet for all of 2002.
Strengthening demand for offices, meanwhile, pushed up average asking rent islandwide to $27.05 per square foot, up from $26.84 at the end of the second quarter and $26.39 one year earlier.
If the vacancy rate continues to ratchet down, landlords will become reluctant to offer prospective tenants incentives, such as interior construction costs and months of free rent, to take space in their buildings.
The strengthening market has given real estate developers, among them Reckson Associates Realty Corp. and Tritec Real Estate Co., impetus to start construction of new office space.
Reckson has begun construction of a 277,000-square-foot office building along the Long Island Expressway in Melville. Tritec is planning to convert several vacant industrial buildings in Hauppauge into almost 200,000 square feet of office space.
