At the onset of the pandemic, there was a theory: Suburban offices might fare better than their urban counterparts because businesses would lease satellite locations closer to where their employees live.
It turned out that was not the case — at least on Long Island.
A report by Avison Young found leasing activity there has paused since the pandemic, and at the current pace, this year’s leasing volume will fall 42 percent below the 20-year annual average.
“There is no modern precedent for the post-Covid slowdown in Long Island leasing activity due to the sudden change in office occupiers’ future workplace strategies and the 2020 recession,” the report said.
Long Island is not the only suburban office market hammered by the pandemic, during which a majority of office employees are working from home. In New Jersey, the vacancy rate in the second quarter climbed to 18.8 percent, including 9.1 million square feet of empty space available for subleasing, according to Avison Young. Manhattan’s office availability hit a record-high at 17.1 percent at the end of May and was still 17 percent at the end of June.
Long Island’s office vacancy rate — both direct and sublease vacancies — at the end of the second quarter was 9.4 percent, up 3 percent from the end of 2020 and up 32 percent from the end of 2019.
Total vacant sublease space in the second quarter was 717,000 square feet, or 11.5 percent of the total vacancy. The share of sublease vacancy has shrunk slightly in the second quarter compared to the end of 2020, when it was 12.8 percent. But the share was much lower in 2019 at 7.7 percent.
Office investment sales have also been dismal: The total from the beginning of 2020 through the second quarter was only $435 million, which is an annualized decrease of 50.4 percent compared to the five-year average, according to the report.
The price has also softened to $134 a foot, down 52.5 percent from the 2019 high of $282.