Long Island industrial market improving at a rapid pace: It's a strong seller/landlord market

As the U.S. economy continues to slowly improve, the industrial market on Long Island is improving at more rapid pace. The main contributing factors remain the pent up demand for space and lack of inventory within the market place. Good, functional space is hard to find and if it does exist, there are probably several viable candidates pursuing it. Several prominent landlords have occupancy rates of 90-95% and sale inventory remains even more limited. Although it's not the case for everyone, most local businesses are reporting more consistent growth and, as a result, they're looking to find long term leases or buildings to purchase while they can still take advantage of the low interest rates, IDA incentives and relatively low cost of entry into the market. Over the past 18 months, the proverbial pendulum continues to swing from what was a strictly buyer/ tenant market to what's now a strong seller/ landlord market. The upshot has been that, industrial rentals and sales prices have been climbing and landlords are being less flexible, offering less tenant improvements (TI) investments and fewer rent concessions. However, difficult or unappealing space located in tertiary markets remains a challenge to stabilize with quality tenants. On the other hand, owners that re-invest in their properties with a new façade, roof, parking lot, etc. have seen significant returns on their investments. The last contributing factor which we, as brokers, feel is a significant indicator, is the return of 1031 exchange money coming from Queens and Brooklyn, which we haven't seen come back since pre-recession. Investors are dipping their toes back into the redevelopment of industrial warehouses into residential apartments and are offering big money to incentivize owners to sell or relocate their operations. This has resulted in companies looking towards Nassau and Suffolk County with deep pockets and money to spend. As long as interest rates remain low, the broader economy remains stable and a glut of space doesn't abruptly hit the market, we're forecasting this trend of upward pressure on the industrial market to continue for the foreseeable future. Kyle Burkhardt is a managing principal at Alliance Real Estate Corp., Deer Park, N.Y.