In tight industrial market, new vacancies won’t last long

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Most times, when a landlord loses a big tenant, it isn’t great news.

But these days, if the space is for industrial use, there is much less concern.

So when the Sub-Zero Group gave notice that it plans to vacate its 120,000-square-foot space at 300 Michael Drive in Syosset in two months, it didn’t chill the building’s ownership, BEB Capital.

Instead, the impending vacancy creates a rare opportunity for a business needing a distribution facility in Nassau County, where available industrial space remains scarce.

In the third quarter, the Long Island industrial vacancy rate dropped to an historic low of 3.4 percent, a 20-basis-point decrease from the previous quarter and the 12th straight quarter with an overall vacancy rate of less than 4 percent, according to the latest report from Newmark Knight Frank.

Sub-Zero has been leasing nearly half of the 260,000-square-foot building at 300 Michael Drive for a little more than five years, where it employs about 20 people. The company, a high-end kitchen appliance supplier and distributor, is relocating its Syosset operations to its regional distribution center in Hamilton, N.J.

Before Sub-Zero, Snapple had occupied the same space for nearly 20 years.

Overall, BEB Capital’s industrial portfolio of 1.5 million square feet is about 95 percent occupied, as demand from e-commerce companies and other warehousing and distribution tenants is stronger than ever.

“Because industrial real estate was ignored for so long in favor of other property sectors, you had plenty of supply,” said Lee Brodsky, BEB Capital CEO. “But the demand for warehousing and distribution has accelerated faster than the supply can keep up. As a result, prices and values have gone up significantly in recent years.”

The average asking rent for Long Island industrial space last quarter was $12.45 a square foot, an increase of 6.5 percent from a year ago. BEB Capital is asking $12 a square foot (triple-net) for the Michael Drive space, a slight bump from the previous rent. Another 17,500-square-foot space in the same building is also available.

BEB Capital was founded in 2013 by Bert Brodsky, who began acquiring commercial properties in the 1980s. Since then, BEB has leased hundreds of thousands of square feet of industrial space to national, regional and local users in Port Washington, Syosset, Bethpage and Hicksville.

The firm enlisted NKF’s Dan Oliver and Dan Marcus to fill the upcoming vacancy at 300 Michael Drive, and given the demand for industrial space, the assignment will likely be brief.

“We are optimistic that we will lease the space in a short period of time,” Oliver told LIBN. “We already have some preliminary interest from a number of users.”

While there are a few new industrial projects in the pipeline in surrounding areas, like a 43,000-square-foot building on 3 acres at 300 West John St. in Hicksville from Sanders Equities; and a 195,610-square-foot building on 9 acres at 344 Duffy Ave. from Lincoln Equities; brokers say leasing deals are already being negotiated for those properties.

“A lot of large projects are coming on line, but it will be some time before they’re delivered for tenants’ occupancy,” Brodsky said.

Meanwhile, BEB Capital is eyeing more industrial real estate opportunities.

“We’re in growth mode,” Brodsky said. “We’re seeking to acquire additional industrial properties in Nassau and Suffolk and other locations along the East Coast.”

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