Long Island Office Leasing Activity Posts Slowdown in Q2 Despite Suburbs' Appeal

Despite New York City based companies looking to suburbs for cheaper office space outside dense urban areas, leasing activity for Long Island office space experienced a slowdown in the second quarter.

Vacancies on Long Island increased in Nassau and Suffolk counties from the second to third quarters of 2020, according to a Colliers report. Nassau County experienced a 60 point change in vacancy to 8 percent, whereas Suffolk County showed an 80 percent change in vacancy to 9.3 percent. Overall, vacancy increased 80 points to 8.6 percent on Long Island.

Limited supply of office space and a car-dependent mode of transportation may have contributed to the increases in office vacancies. State government responses to the COVID-19 pandemic also mandated social distancing requirements, moving most tours and conferences online and further harming leases and sales in the area. Once office buildings re-open, new social distancing and hygiene protocols, as well as upgrades in air filtration systems, will need to be in place.

The closure of non-essential businesses has dampened leasing activity, but may pick up in the fourth quarter as Long Island’s unemployment rate dipped to 12.9 percent in June, down from 16.1 percent in April. Nationwide, the U.S. economy’s gross domestic product hit a record low at -5 percent. Leasing activity on Long Island dropped by 58.74 percent from the first quarter.

Asking rental prices in Nassau County stayed the same in the second quarter at about $28.49 per square foot per year for Class A and B. However, asking rental prices dipped .38 percent to $23.42 on Suffolk County.  Net absorptions have dipped to 20-year record lows at -448,247 square feet.

Sales in 2020 have slowed, as the year-to-date sales in 2020 account for only 15 percent of the total transactions of 2019. The average sales price for offices dropped by 3.62 percent to $133 per square foot.