Research & Forecast Report LONG ISLAND INDUSTRIAL MARKET Leasing Activity Ticked Up with A Large Upswing of Absorption Rose Liu Director of Finance & Research Long Island Takeaways > > The outlook of the Long Island industrial market shows positive signs with decreasing vacancies and booming absorption. The unemployment rate on Long Island declined to 3.90% in Q2 from 4.33% in Q1. United States employers have added 220,000 jobs in the month of June, the highest number in four months. Increased job opportunities in the face of a slow growing economy is a confusing but enticing parallel. GDP shrank to 1.2% in Q1 from the expanded GDP of 2.1% in Q4 2016. The Federal Reserve has raised its benchmark interest rate for the third time which would increase the consumers borrowing rates. Manufacturing Index (PMI) expanded to 57.8 percent in June and the overall economy grew for the 97th consecutive month. > > The Long Island Industrial market s vacancy rates have stayed steady, with no major increases or decreases across the board, recording 3.3% in Q2. > > Rental rates for the Long Island Industrial market had a slight decrease in Q2, with a minor drop from $9.86 per square foot (psf) in Q1 to $9.55 psf in Q2. > > Absorption on Long Island saw a great increase in Q2, with a 156,091 sf increase in net absorption. > > Leasing activity totaled 825,332 sf in Q2, 41% up from Q1 however was still 29% down year-over-year. The average sales price improved by $10.00 psf from $108.00 psf in Q1 to $118.00 psf in Q2 however the cap rate remained stable at 8.05%. Market Indicators Relative to prior period VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE** Note: *Projected Summary Statistics Long Island Industrial Market Nassau Suffolk Long Island* Vacancy Rate 3.7% 3.1% 3.3% Change From Q1 2017 (basis points) Net Absorption (Thousand Square Feet) Vacancy Rate (Warehouses) Vacancy Rate (Flex Buildings) Nassau Nassau Q3 2017* Suffolk -10 0-10 62.9-0.9 61.9 3.3% 2.8% 3.0% 6.6% 6.1% 6.3% Suffolk Q3 2017* Asking Rents Per Square Foot Per Year Suburban $9.93 $9.24 $9.55 Change From Q1 2017-4.2% 1.3% -3.1% Suburban Warehouses $9.83 $9.24 $9.47 Suburban Flex Buildings $10.32 $9.50 $10.32 *Long Island Industrial Market refers to Nassau & Suffolk Counties; 10,000 square feet and above
Gross Domestic Product (GDP): Percentage Change From Preceding Period Unemployment Trends - Nassau & Suffolk 6.00 5.00 4.00 3.00 2.00 1.00 - GDP % Change Quarter-over-Quarter % Change Unemployed in Thousands 100.00 6.1% 90.00 80.00 4.9% 70.00 4.5% 60.00 50.00 40.00 30.00 20.00 10.00 - Unemployment Rate 7.00% 6.00% 3.8% 3.9% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% (1.00) Source: US Department of Commerce Vacancy > > The Q2 vacancy rates on Long Island have shown no significant changes from the previous quarter. Nassau County went from 3.8% in Q1 to 3.7% in Q2, and Suffolk County stayed static at 3.1% in Q2. The Central Nassau submarket exhibited the largest drop in vacancy rates from 2.8% last quarter to 2.1% in Q2. The Eastern Nassau submarket had the highest vacancy rates compared to other submarkets for the second year in a row, ringing in at 3.8%. The vacancy rates have been unchanged at 3.1% in the Industrial sector in Suffolk County this quarter, whereas Q1 there was a slight change. Long Island Absorption (Square Feet, in Thousands) Square Feet Long Island Industrial Net Absorption 2012-2017 -455-291 -35 62 123 304 309 358 340 514 977 Source: NYS Department of Labor Rental Rate > > The Q2 average asking rents for all of Long Island totaled $9.55 psf, 3.1% down from $9.86 psf last quarter. While Suffolk County had a slight increase from $9.12 psf in Q1 to $9.24 psf in Q2, Nassau County saw a decrease from $10.36 psf in Q1 to $9.93 psf in Q2. The Western Nassau submarket led the pack this quarter as usual with the highest average asking rents coming in at $15.64 psf in Q2. Warehouse rental rates saw a slight decrease, from $9.83 psf in Q1 to $9.47 psf in Q2, while Flex buildings saw an increase from $10.12 psf in Q1 to $10.32 psf in Q2. Absorption > > The Long Island Industrial market made a large upswing, with absorption going from negative 94,180 sf to positive 61,911 sf in Q2. While Nassau County was still down, going from positive 294,180 sf in Q1 to positive 62,853 in Q2, Suffolk County jumped from negative 388,360 sf in Q1 to negative 942 sf in Q2. Both Flex buildings and Warehouses had significant increases in absorption, with Warehouses going from negative 11,723 sf in Q1 to positive 51,031 sf in Q2, while Flex buildings jumped from negative 82,457 sf in Q1 to positive 10,880 sf in Q2. (600) (400) (200) 0 200 400 600 800 1,000 1,200 UPDATE Vacancy Rates, Asking Rents, & Absorption VACANCY RATES AVERAGE ASKING RENTS NET ABSORPTION (IN THOUSANDS) Source: CoStar & Colliers International Research 2 Long Island Research & Forecast Report Long Island Colliers International
Capital Markets > > The sales transaction volume for the Long Island industrial market hit $12.8 million in Q2, which was a significant drop from one year ago, where the transaction volume totaled $85.6 million. The rolling 12 month total has fallen to $233.9 million. The Q2 Cap rate was on par with the last two quarters, standing at 8.05%. The average $/psf was up this quarter however, ringing in at $118 psf, up from $108 psf from Q1, a 9.3% increase. The buyer composition breakdown this quarter was dominated heavily by private buyers, with them making up 44% of the buying composition. The next largest category was institutional buyers, coming in at 18%. One of the largest sales transactions was a 52,573 square foot Class B Industrial Warehouse sold for $4.25 million at 170 Allen Boulevard in Farmingdale. RP Realty Enterprises purchased the 35,000 square foot Industrial Manufacturing building from Gerard Wuttke Trust for $4.5 million at 37 Denton Avenue in New Hyde Park. Ropack Inc. topped the list for biggest buyers, and Rechler Equity Partners topped the list for biggest sellers this quarter. Lease Activity > > The Long Island leasing activity picked up by 41% to 825,332 sf in Q2 however it was still 29% down from a year ago. Nassau County leasing activity went up by 36% to 328,881 sf and Suffolk County made a 45% increase residing at 496,451 sf quarter-over-quarter. Leasing activity for warehouses took up the majority of market share of 86% however flex buildings comprised only 14%. A large lease signing occurred this quarter was a 107,000 square foot Class B Industrial Manufacturing building with the asking lease price of $14.50 PSF NNN at 165 Eileen Way in Syosset. Leasing Activity (SF) Investment Activity Buyer Types 13.0% 10.0% Cross-Border 18.0% Institutional REIT/Listed Private 44.0% 14.0% User/Other Nassau VS. Suffolk Industrial Leasing Activity 2012-2017 Nassau Suffolk Average 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Source: CoStar & Colliers International Research Update Transaction Highlights INDUSTRIAL SALE ACTIVITY PROPERTY ADDRESS TOWN SUBMARKET SIZE SF SOLD PRICE 170 Allen Boulevard Farmingdale Nassau Eastern 52,573 $4,250,000 195 East Merrick Road Freeport Nassau Southern 45,500 $3,412,500 86 Cleveland Avenue Bay Shore Suffolk Western 36,750 $1,500,000 37 Denton Avenue New Hyde Park Nassau Western 35,000 $4,500,000 INDUSTRIAL LEASE ACTIVITY Outlook PROPERTY ADDRESS TOWN SUBMARKET SIZE SF LEASE TYPE 165 Eileen Way Syosset Nassau Eastern 107,000 Lease 425 Underhill Boulevard Syosset Nassau Eastern 57,000 Lease 100 Heartland Boulevard Edgewood Suffolk Western 50,000 Lease 511-523 Commack Road Deer Park Suffolk Western 21,500 Lease > > The outlook of Long Island s industrial real estate market is very optimistic with booming leasing activity and positive net absorption. Despite the average asking rental rate which slid, it boosted the leasing activity and is expected to tick up in the third quarter. The Federal Reserve has once again raised its benchmark interest rate and the new range as suggested will be 1% to 1.25% for a current rate of 0.91%. > > The borrowing and consumers costs would be pushed up by the rising interest rate however it would not have a major impact with the continued strength and improvement of the US economy. The growth of E-commerce and technologies have been the driving force to the industrial real estate market and this trend will continue to grow which helps diversity in the Long Island market. 3 Long Island Research & Forecast Report Long Island Colliers International
UPDATE - MARKET STATISTICS SNAPSHOT LONG ISLAND - WAREHOUSES & FLEX BUILDINGS COUNTY VACANCY RATE AVERAGE ASKING RENTS 2017 Q1 2016 Q4 2016 Q3 2017 Q1 2016 Q4 2016 Q3 Nassau Total 3.7% 3.8% 4.4% 4.2% $9.93 $10.36 $10.11 $10.34 1,439 Bldgs Lease 3.7% 3.8% 4.4% 4.1% $9.93 $10.36 $10.11 $10.34 Sublease 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 Suffolk Total 3.1% 3.1% 2.7% 2.4% $9.24 $9.12 $9.82 $8.66 2,925 Bldgs Lease 2.9% 2.9% 2.5% 2.3% $9.24 $9.12 $9.82 $8.66 Sublease 0.2% 0.2% 0.2% 0.1% $0.00 $0.00 $0.00 $0.00 Long Island Total 3.3% 3.4% 3.3% 3.0% $9.55 $9.86 $9.98 $9.60 4,364 Bldgs Lease 3.1% 3.2% 3.1% 2.9% $9.55 $9.86 $9.98 $9.60 Sublease 0.2% 0.2% 0.2% 0.1% $0.00 $0.00 $0.00 $0.00 Warehouses - LI Total 4,036 Bldgs Lease 3.0% 3.0% 3.0% 2.9% $9.47 $9.83 $9.76 $9.65 Sublease 2.8% 2.9% 2.8% 2.7% $9.47 $9.83 $9.76 $9.65 0.2% 0.2% 0.2% 0.1% $0.00 $0.00 $0.00 $0.00 Flex Buildings - LI Total 328 Bldgs Lease 6.3% 6.4% 5.9% 4.3% $10.32 $10.12 $12.25 $9.38 Sublease 6.1% 6.2% 5.7% 4.3% $10.32 $10.12 $12.25 $9.38 0.2% 0.2% 0.1% 0.0% $0.00 $0.00 $0.00 $0.00 LONG ISLAND MARKET EXISTING INVENTORY (SF) JUNE 30, 2016 VACANCY RATE OVERALL AVERAGE ASKING RENT RENTAL RATE (WAREHOUSE) RENTAL RATE (FLEX BUILDINGS) NET ABSORPTION (SF) NET ABSORPTION (SF) CURRENT QUARTER YTD NASSAU Western Nassau 7,070,012 0.60% $15.64 $15.50 $17.25 4,627 25,698 Central Nassau 8,322,392 2.10% $9.86 $9.57 $12.00 58,293 185,714 Southern Nassau 10,376,770 3.60% $9.55 $9.55 - (5,820) (15,933) Eastern Nassau 23,451,340 3.80% $9.95 $9.92 $10.00 (4,706) 126,095 NASSAU TOTAL* 51,439,185 3.70% $9.93 $9.83 $10.32 62,853 62,853 SUFFOLK Western Suffolk 62,553,164 2.90% $8.31 $8.31 - (21,845) (185,272) Southwestern Suffolk 9,321,461 2.50% $10.00 $10.00 - (14,100) (91,654) Central Suffolk 28,804,570 3.00% $9.26 $9.26 - (879) (107,858) SUFFOLK TOTAL** 104,918,388 3.10% $9.24 $9.24 $9.50 (942) (942) LONG ISLAND TOTAL 156,357,573 3.30% $9.55 $9.47 $10.32 61,911 61,911 *Totals include all Nassau Submarkets **Totals include all Suffolk Submarkets Source: CoStar and Colliers International Research 4 Long Island Research & Forecast Report Long Island Colliers International
Featured Listings 2076 5TH AVENUE, RONKONKOMA +/- 23,800 SF Industrial Warehouse for Sale > Office space: +/- 2,000 SF > Well maintained industrial manufacturing/ warehouse > Contemporary offices with central A/C > IDA tax abatements available for qualified buyers > Power & air distribution throughout 47 BROADWAY, LYNBROOK +/- 36,000 Industrial Building for Sale > Located in the heart of Downtown Lynbrook > Property has the ability to build up several stories > Directly next to the LIRR & 1 block from Sunrise Highway > Abundant Parking can be made available > Frontage on 3 streets 100 DAVIDS DRIVE, HAUPPAUGE +/- 65,500 Industrial Warehouse for Sale > Located in the prestigious Hauppauge Industrial Park > Corporate HQ Building part of a portfolio of contiguous properties for sale > Situated on an oversized parcel allowing for potential expansion > Property is 100% NNN leased 1724 FIFTH AVENUE, BAY SHORE-UNIT 1 +/- 90,000 SF Available for Lease > Possible to combine another 10,000-15,000 sf > Former Entenmann s Bakery with floor drains and FDA quarry tile > Ideal for pharma/food manufacturing and distribution > 2.6 miles due South of the Hauppauge Business Park > Automatic Back-up generator > Ceiling height: 25 Clear; 21 loading docks Copyright 2017 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Long Island 1981 Marcus Avenue, Suite E104 Lake Success, New York 11042 +1 516 328 6500 colliers.com/long Island 5 North American Research & Forecast Report Q4 2014 Office Market Outlook Colliers International
403 offices in 68 countries on 6 continents United States: 153 Canada: 29 Latin America: 24 Asia Pacific: 86 EMEA: 111 MARKET CONTACT: Rose Liu Director of Finance & Research Long Island Main +1 516 328 6500 Ext. 555 Dir +1 516 284 3447 rose.liu@colliers.com Marne Agin-Collen Marketing Director Long Island Main +1 516 328 6500 marne.agin-collen@colliers.com $2.6 billion in annual revenue 2 billion square feet under management 15,000 professionals and staff About Colliers International Group, Inc. Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 11 consecutive years, more than any other real estate services firm. colliers.com Copyright 2017 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.