Long Island maintains strong and steady course.

Commercial real estate services firm Cushman & Wakefield released first quarter 2005 office market statistics for Long Island indicating the region continued to strengthen with lower vacancy rates, an increase in asking rents and positive overall net absorption for the sixth consecutive quarter.

The overall vacancy rate remained nearly stable from the 10.2% registered at end of 2004, to 10.1% at the end of the first quarter. Despite the lowest vacancy rates in years, there is a shortage of large blocks of available space.

In addition, the falling vacancy rates have resulted in increased asking rents which are at their highest since the end of 2001.

At the end of the first quarter, overall asking rents were at $27.83 per square foot (psf), and class A rents were $30.83 psf. Another notable trend has been the increase in electric prices in many buildings, ranging as low as $2.50 to as high as $3.00 psf.

"The improving economy has driven demand from companies on Long Island looking to move into new space or expand their offices," said Jim Fagan, senior managing director and head of Cushman & Wakefield's Long Island, and Westchester/Fairfield County offices. "Sales activity is strong as is the leasing market, but the amount of supply has significantly decreased."

Overall net absorption was a positive 8,819 sf for the quarter, while leasing activity measured 453,599 sf, on par with last year's level of 448,000 sf. Several office buildings currently under construction are scheduled for completion over the course of the next few months.

In Western Suffolk County, 40 Marcus Drive and 68 South Service Road, both in Melville, consisting of 50,000 sf and 277,081 sf respectively, are scheduled to deliver in the first half of 2005.

In Eastern Nassau County, 135 Crossways Park Drive in Woodbury, is set to deliver 120,000 sf to the office inventory by year-end 2005. In Jericho, 50 Jericho Quadrangle, a 134,000-sf office building may be complete by end of 2005 or early 2006. Vacancy rates increases are likely upon availability of this space.

The greatest area of activity during the first quarter has been in investment sales. In a joint venture sale, GHP Office Realty, LLC, and CLK Management purchased the Tilles Investment Companies portfolio.

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The acquisition involved the purchase of 2.1 million square feet (msf) of office properties for $330 million. GHP furthered its impact in the Long Island real estate market, with its purchase of a nine building portfolio owned by Jobco Realty & Equity for $70 million. Accordingly, sales prices have also increased and are approaching $200 psf. The increase in sales activity and transfer of ownership is expected to translate into higher rental rates for tenants.

Employment on Long Island continues to display steady job growth. According to the New York State Department of Labor, the Long Island economy has gained 14,200 jobs in the past 12 months.

As of February 2005, the unemployment rate registered at 4.6%, below the New York State average of 5.6%. The labor market has seen growth in many job sectors, most notably in professional and business services.