Continued activity, declining vacancy seen on Long Island.

Corporate expansions during the past several years, spurred on by healthy economic conditions, continue to create increased demand for office space on Long Island, according to Cushman & Wakefield of Long Island's Research Services Group, which has issued its first quarter market report.

The Island leads the region in terms of growth, particularly among high-tech companies in computer-related fields such as Internet and telecommunications firms.

"The vacancy rate for the Long Island office market continued to reach record lows," said Ted Stratigos, senior director of Cushman & Wakefield of Long Island. "The overall vacancy rate at the end of the first quarter rested at 9.1 percent, versus 10.7 percent a year ago. The demand for space has driven up the average asking rental rate as well, which reached $24.98 per square foot."

Significant leases during the first quarter involved financial and legal services firms, along with technology.

Leasing activity during the first quarter totaled 512,871 square feet. According to Stratigos, the remainder of the year will bring high levels of activity. "The first quarter has traditionally been the quietest in terms of leasing activity," he explained. "However, we anticipate that the momentum will build through the remainder of the year to reach a level of activity that is comparable to 1998."

At year-end 1998, the Island experienced more than 2.8 million square feet in leasing activity.

The supply of space, coupled with the confidence of developers, continues to prompt speculative development. Currently, there is almost 300,000 square feet of spec construction underway or slated to begin in Nassau and Suffolk counties. Other projects in the pipeline include Tritec's new 400,000 square-foot office complex in Hauppauge, NY. In addition, developers such as Reckson are expected to build or convert existing buildings due to the level of demand.

The overall vacancy for Class A space fell to 6.7 percent from 9.8 percent last year. As a result, the demand for secondary space increased as expected, with the Class B vacancy rate declining from 11.5 percent to 11.2 percent. Asking rental rates for Class A and Class B space rose to $27.59 per square foot and $23.60 per square foot, respectively.

Western Nassau County experienced a significant amount of activity during the past year, causing the vacancy rate to decline from 14.7 percent to 7.7 percent. "This is reflective of several significant transactions," Stratigos explained. Active business sectors included the insurance and medical fields. In addition, Astoria Federal Savings purchased 2000 Marcus Avenue to house its mortgage operations close to its headquarters, also on Marcus.

The remainder of Nassau County also experienced declining vacancy rates, as well as increased demand for Class A space. As a result, the Class A rental rate continued to rise.

Western Suffolk County, which includes the Route 110 Corridor, experienced a significant drop of 1.5 percent since year-end 1998. "The vacancy rate for the first quarter was 13.7 percent," Stratigos said, adding that the drop from year-end was a result of several significant leases. The Central Suffolk County office market continued to tighten. In fact, the overall vacancy rate was 10 percent versus 13 percent a year ago, and the vacancy rate for Class A space reached 7.2 percent one of the lowest on Long Island."

"The question on everyone's mind is can the region continue to absorb all of the new space which is coming on-line in a relatively short period of time," Stratigos concluded. "Only time will tell."