LI turns in a good performance for 1st quarter.

Demonstrating continued confidence in the growth of Long Island's commercial real estate market, developers are currently building on spec and investors are buying existing retail and industrial properties for conversion to class A office space. Fueling the building frenzy is the lack of large blocks of quality office space in a market where demand remains strong, following 2004's robust leasing activity.

According to CB Richard Ellis' First Quarter 2005 Office Market Report, at 10.6% Long Island's availability rate is a mere half a percentage point higher than that posted during the same time last year, primarily due to new construction added to the market over the past few months. If this new space were to be factored out of the equation, the availability rate would be below equilibrium at just 9.5%. The increase of supply also resulted in negative net absorption (146,000 s/f) for the first time in more than two years.

Despite the slight blip in Long Island's absorption and availability rates, there are several new properties slated to hit the market in 2005. Among the largest are three buildings in Hicksville totaling 435,000 s/f. Located adjacent to the Hicksville Long Island Rail Road station--a major transportation hub--the properties were marketed for sale by JP Morgan Chase and are currently under contact to be acquired by the Apollo Real Estate Group. In addition, the 110,000 s/f former Saks Fifth Avenue building in Garden City is slated for redevelopment by the new ownership, Alfred Weissman Real Estate.

On the leasing front, activity for Long Island as a whole totaled 458,000 s/f. The top lease was a renewal by the Island Peer Review Organization at 1979 Marcus Ave. in Lake Success. The health care quality evaluation company renewed and extended its 77,000 s/f lease at the property for an additional 11-year term. Other significant lease transactions consumated during the first quarter included Cameron Engineering's 20,000 s/f commitment at 100 Sunnyside Boulevard in Woodbury; Tower Insurance's 17,000 s/f lease at 225 Broad Hollow Road in Melville; and Ford Motor Credit's 14,000 s/f lease at 333 Earle Ovington Boulevard in Uniondale.

Long Island's investment sales market, which has been extremely active over the past two years, remained strong in the first quarter of 2005. Capital market fundamentals remained favorable, despite rising interest rates. First quarter activity included the record sale of the Tilles portfolio, a 2.1-million s/f, 43-property to GHP/CLK. Another notable transaction was the sale of the Gateway in Lake Success, two class A office buildings totaling 700,000 s/f, which sold for $107 million.

"Strong job growth figures and an overall strengthening of the local, regional and national economies bode extremely well for the continued health of Long Island's commercial real estate market," said Tom Krieger, managing director of CB Richard Ellis Long Island region. "One major factor demonstrating the market's strength is climbing rental rates. During the past quarter alone, average asking rents in Long Island climbed by nearly 3% to end the first quarter at $24.87 per s/f."