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News release

New York

Jones Lang LaSalle Reports Long Island Office Market Sees Rising Vacancy Rates, Falling Average Asking Rents Over Past 12 Months


New York, February 17, 2009 — Jones Lang LaSalle announced that the ongoing economic turmoil affecting the entire New York metropolitan area has had an impact on the Long Island office market. Vacancy rates increased and average asking rental rates fell throughout the market in the fourth quarter of 2008.
 
In the past year, Long Island has seen its overall office vacancy rate increase 12.4 percent, rising to 13.6 percent in the fourth quarter of 2008 from 12.1 percent at year-end 2007. During this same time period, average asking rental rates declined 1.3 percent, falling to $25.97 per square foot from $26.30 per square foot. This was largely fueled by a 24.6 percent increase in the vacancy rate for the market’s top-end spaces where Long Island’s Class A vacancy rate climbed to 14.7 percent from 11.8 percent in the past 12 months, and average asking rents declined 4.6 percent to $28.41 per square foot from $29.77 per square foot.
 
“We expect that demand for Long Island office buildings will likely weaken at the same time that supply increases due to new construction in the pipeline and increased sublease space coming to the market in 2009, causing a decline in rental rates over the next two to four quarters,” said Joshua Gleiber, vice president with Jones Lang LaSalle’s New York office. “To maintain occupancy in their portfolios, we expect building owners on Long Island to be more aggressive in making deals, with the spread between average asking rental rates and net-effective rents widening.”
 
The Long Island office market saw approximately 570,000 square feet of positive net absorption in the fourth quarter of 2008. This was driven primarily by demand for lower-cost Class B space, which accounted for 53 percent of the absorption despite comprising only 43 percent of the market. Positive absorption was offset by a 4 percent increase in sublease space, bringing the total amount of sublease options on the market to 530,000 square feet. Looking forward, Long Island will be further impacted by the 760,000 square feet of office product under construction in both Nassau and Suffolk counties, and the 150,000 square feet of sublease space that was added to the inventory at the start of 2009.
 
Overall vacancy rates fell 1.4 percent this quarter, dropping to 13.6 percent in the fourth quarter 2008 from 13.8 percent in the third quarter of 2008. Long Island’s Class A buildings saw vacancies slip 2 percent, dropping to 14.7 percent from 15 percent during the same time period. Class B product reported a 1.6 percent drop in vacancy rates, decreasing to 12.6 percent from 12.8 percent.
 
Overall average asking rents decreased 2 percent at year-end 2008, declining to $25.97 per square foot in the fourth quarter of 2008 from $26.47 per square foot in the third quarter of 2008. Class A rents dropped nearly 3 percent, falling to $28.41 per square foot from $29.19 per square foot during the same time period. Class B buildings reported a less than 1 percent decrease in rates, slipping to $23.27 per square foot from $23.47 per square foot.
 
The Nassau County office market saw Class A office vacancy rates increase slightly this quarter, rising to 14.4 percent in the fourth quarter of 2008 from 14.3 percent in the third quarter of 2008. Class B buildings saw vacancy rates fall 2.5 percent, dropping to 11.9 percent from 12.2 percent during the same time period.
 
The boost in vacancy rates among Nassau County’s top-end buildings fueled a greater than 4 percent decrease in Class A rents at year-end 2008, falling to $30.77 per square foot in the fourth quarter of 2008 from $32.13 per square foot in the third quarter of 2008. Class B buildings reported that rents increased less than 1 percent, rising to $25.94 per square foot from $25.72 per square foot.
 
Suffolk County posted falling vacancy rates in all building classes this quarter. Class A buildings saw vacancy rates decrease more than 4 percent, falling to 15.1 percent in the fourth quarter of 2008 from 15.8 percent in the third quarter of 2008. Suffolk County’s Class B market posted a slight decrease in vacancy rates, dropping to 13.5 percent from 13.6 percent.
 
Although vacancy rates fell this quarter, Suffolk County rents fell in all building classes. Class A rents dropped less than 1 percent, falling to $25.50 per square foot in the fourth quarter of 2008 from $25.72 per square foot in the third quarter of 2008. At the same time, Class B rates fell more than 3 percent, dropping to $20.02 per square foot from $20.68 per square foot.
 
About Jones Lang LaSalle
 
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide.  In the New York area, Jones Lang LaSalle provides leasing and management services for nearly 45 million square feet of commercial real estate. For further information, please visit our Web site, www.joneslanglasalle.com.
 
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