Long Island commercial/industrial markets at peak performance.

Long Island's real estate market is in the best shape it has been since the recession. All segments, from office and industrial to retail, can cite several indicators of a healthy and vigorous market.

If we focus on the commercial/industrial side of the market, the signs are everywhere - from heavy REIT purchasing activity to build-to-suits, renovations, expansions and all time low vacancies.

REITs Pumping Up The Economy

Perhaps the best evidence of a strong economy and its impact on the local real estate market is the heightened buying sprees of our nation's REITs. First Industrial Realty Trust of Chicago, IL, in particular, has been setting its sights on Long Island properties for the past 18 months. In the past several months alone, our office handled major transactions for First Industrial. One involved First Industrial's purchase of a 215,000 square-foot industrial facility in Hicksville, formerly owned by a General Instrument Division. The second entailed its purchase of a 350,000 square-foot industrial/warehousing facility in Garden City valued at $14.5 million.

More recently, First Industrial received a 4-1 vote from the Town of Riverhead in favor of its $17 million proposal to purchase 525 acres of land at the former Grumman aircraft assembly plant in Calverton. According to recent news reports, First Industrial is projecting an investment of approximately $10 million to renovate the existing buildings and create die infrastructure the zoning will require, and an estimated $100 million for new construction at the site. Needless to say, Riverhead is extremely enthusiastic about this project, which they expect will generate 3,000 to 5,000 new jobs for Long Island's east end initially, which will spin off another estimated 5,000 to 6,000 new jobs. As the exclusive broker on the Calverton property, Grubb & Ellis/Island Realty is very pleased with the Town's vote in approval of the First Industrial bid, and confident that the remaining acreage on the site - approximately 2,350 acres - will prove equally attractive to other REITs and/or developers.

Closer to home, Reckson of Melville, NY, a local REIT, is busy purchasing properties and constructing new multi-use office, industrial and R&D facilities. Among them is a 106,000 square-foot multi-tenant facility at its 39-acre site in the Islip-MacArthur Airport corridor in Ronkonkoma, NY. Both the First Industrial and Reckson projects, as well as the attention our marketplace is getting from other REITs, is clear evidence of the market's robust rebound.

The REITs are not the only ones in a buy mode. In early June, one of the region's largest commercial real estate transactions occurred in the sale of the 212,000 square-foot Triad 1 office building in Lake Success, NY to Lighthouse Real Estate Ventures of Rockville Centre, NY.

New Construction & Renovations: A Hot Tag Team 

Another sure sign of the market's strength is the number of new projects and renovations underway throughout Long Island's office corridors and industrial parks. One area with available land to support development activity is the aforementioned Ronkonkoma/MacArthur Airport hub. There, town officials estimate a significant number new construction and expansion projects started in 1997; a trend continuing in 1998.

As for renovations and build-to-suits, they can be observed in various stages of completion throughout Ronkonkoma and other sites, from Nassau County's Mitchel Field/Garden City area and Westbury, to Farmingdale, Melville, Hauppauge and points east in Suffolk County. For example, the 174,000 square-foot headquarters of Symbol Technologies in Bohemia, NY is being expanded by an additional 120,000 square feet. In Hauppauge, Racanelli Construction just completed a 70,000 square-foot world headquarters for the Cellular Communications Division of Audiovox Corporation. In Huntington, a 40,000 square-foot facility is being renovated for the new corporate headquarters and distribution center for Maces Housewares. These are just some of the many examples of Long Island's current commercial/industrial construction projects.

Among the top office projects underway are Edward Minskoff's 750,000 square-foot office complex at the Roosevelt Centre in Westbury, NY; Reckson's 450,000 square-foot complex in Melville, NY; and Titles Investment's 480,000 square-foot project consisting of two buildings in the Expressway Corporate Park in Huntington.

Falling Vacancy Rates

It comes as no surprise to area brokers that Long Island's commercial/industrial vacancy rates continue to fall. Island-wide, industrial rates are now in the 7 percent range, and we expect them to drop by another .5 to 1 percent through the remainder of '98. Overall, office vacancy rates are hovering in the 10 percent range and are also in decline. One segment of the office market - Class B buildings - are particularly hot, owing in part to their greater availability (estimated 11.5 percent vacancy rate) than Class A buildings. Conversely to falling vacancy rates are rising rents, with office space leaping from an average $20.75 per square foot in 1996 to $22.13 square foot in 1997, and rising through 1998 at a similar pace of approximately 10 percent. Rents for research and development (R&D) applications also are increasing. In '96, R&D space was averaging $7.08 per square foot, compared with a $7.80 per square foot rate in '97.

All in all, it has been a champion season for Long Island's commercial/industrial real estate - and one, based on all current economic projections, which is expected to endure over the foreseeable future.