Long Island Industrial Land Prices Spike 60 Percent in 2014

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According to JLL, property investors looking for profitable sites to develop continued to generate an impressive volume of Long Island industrial sales in the third quarter of 2014, particularly in Queens. The heavy interest has boosted industrial property values in New York's largest borough, with the average price up 60.0 percent year-over-year.

Manhattan developers are increasingly investing in Queens due to lower land costs. The Durst Organization, for example, purchased the Hallets Point investment portfolio in Long Island City from Famitech Inc. and plans to redevelop the three former industrial buildings into a residential complex. As more industrial product like this is converted to new uses, the amount of space available for lease continues to drop, pushing down vacancy rates and boosting industrial rents.

Industrial leasing activity remains down throughout Long Island about 30 percent compared with the strong volume recorded in 2013, primarily due to the lack of available product. Approximately 935,135 square feet in industrial transactions took place in the third quarter of 2014 vs. 756,878 square feet one year ago. Third-party logistics firms were responsible for most of the activity this quarter. Elm Global Logistics inked the largest industrial deal signed so far this year with its renewal of 542,300 square feet at 50 Emjay Blvd. in Brentwood. In addition, Aramex International signed a lease extension and expansion to 64,900 square feet at 182-17 150th Avenue in Jamaica.

"The logistics sector was responsible for most of the leasing activity throughout Long Island in the third quarter," said Reid Berch, senior vice president with JLL's Long Island industrial team. "A fair number of third-party logistics providers with more than 100,000 square feet in requirements each are scouring Queens and Long Island for suitable sites. The shrinking supply of inventory in Queens, combined with a thriving logistics sector, has industrial rents set to grow steadily into 2015."

Long Island industrial saw positive absorption in the third quarter of 2014, with positive absorption in Suffolk County and Queens balanced out by negative absorption in Nassau County. The industrial market has posted nearly 111,886 square feet of positive absorption year-to-date.

Long Island's industrial sector continues to see very little new construction. Approximately 210,000 square feet of new industrial product was underway in Suffolk in the third quarter of 2014. Rechler Equity Partners has approximately 119,000 square feet of built-to-suit industrial product in the pipeline within the Islip Foreign Trade Zone, including a 54,000-square-foot building at 100 Trade Zone Drive, a 24,000-square-foot building at 101 Roebling Court, and a 41,000-square-foot building at 2 Roebling Court, all in Ronkonkoma. The 60,000-square-foot 220 Roger's Way, the first industrial building at Hampton Business District in Westhampton Beach, broke ground in April and is now 15 percent leased.

Other highlights from JLL's third-quarter 2014 Long Island industrial market report include:

• The overall industrial vacancy rate for Long Island decreased 4.4 percent (or 20 basis points) to 4.3 percent this quarter from 4.5 percent in the second quarter of 2014.

• The average asking rental rate for Long Island industrial space rose 1.8 percent to $10.18 per square foot this quarter from $10.00 per square foot in the second quarter of 2014.