LI speculation leaves market with too much space.

Smaller transactions and renewals characterized Long Island's office leasing activity during the third quarter of 2005, while speculative developments as well as the banking industry mergers and acquisitions craze continued to dominate the landscape, adding new space to the market.

As a direct consequence of the speculative development taking place throughout Long Island and the space returned to the market from corporate consolidations, the market's availability rate jumped to 13.6% for the quarter, up from the 9.6% posted during the same time last year, according to CB Richard Ellis' 3rd Quarter 2005 Office Market Report.

Despite this increase, Long Island's availability rate was the second lowest among major New York tri-state suburban office markets and average asking rents continued their record-setting rise. In fact, at $25.77 per s/f, asking rents were $.17 higher than those posted last quarter and a whopping $1.30 per s/f more than the figure recorded during the third quarter of 2004.

The lack of large scale lease commitments contributed to the market's overall lackluster performance during the third quarter of 2005. Activity dropped for the fourth consecutive quarter as the market posted just 1.1 million s/f in total leasing, with the largest deal being a 45,000 s/f renewal by Levitz Home Furnishings at 300 Crossways Park Drive in Woodbury, N.Y. Other notable, yet smaller transactions included Carco Group's 24,000 s/f commitment at 5000 Corporate Court in Holtsville; Signature Bank's 23,000 s/f lease at 70 Glen Street in Glen Clove; and Keyspan Corporate Services' 17,000 s/f deal at 100 Duffy Ave. in Hicksville.

On another note, Long Island's investment sales market continued its hot streak, which began more than two years ago. Well capitalized local and regional investors are deploying their funds at a brisk pace. The top sale concluded in the third quarter was Lincoln Equities' purchase of a 349,000 s/ f office property at 1979 Marcus Ave. for $53.5 million. Thanks in part to the market's good business dynamics and fairly stable interest rates, industry experts predict continued strong activity in this sector for the remainder of the year and early 2006.

On the office leasing front, the market is set to rebound over the next few months with a major office leasing deal slated to close by year end at 68 South Service Road.