Commercial real estate in Suffolk County shows mixed recovery after the pandemic

By Danny Raffa

SUFFOLK COUNTY, N.Y- After being disrupted severely during the COVID-19 pandemic, the commercial real estate market in Suffolk County is starting to recover. Though the pace of that recovery depends mainly on the type of commercial property involved. 

The office market is still adjusting and recovering slowly from the transition from traditional workplaces and more toward remote work, according to Robert Monahan, a commercial real estate attorney and retail specialist with Island Associates Real Estate.  

“We say a lot of vacancy post-COVID with people really grasping onto remote work”, Monahan said. “Over the past couple of years, we’ve begun to see some that vacancy absorbed, but were not yet back to pre-covid occupancy levels” 

While office leasing is recovering, other areas of the market are showing better performance. 

Retail and industrial properties have shown much fortitude across Suffolk County. Retail locations are actively benefiting from fewer new developments. With fewer shopping centers being developed, already existing retail spaces have become more lucrative as businesses fight for a limited number of available locations.  

Industrial properties, especially warehouse space, have remained strong; Monahan said demand has increased significantly for modern industrial properties to support logistics and distribution. 

“Many of Suffolk County’s industrial buildings were constructed decades ago with 12-foot ceilings,” Monahan said. “Today, new construction is taking place with ceiling heights of 25 feet or greater to create more usable warehouse space.” 

According to a report from Lipsky Construction, developers throughout Suffolk County are emphasizing a focus on warehouse and logistics facilities in response to the continued growth of e-commerce and regional distribution needs. 

Interest rates have also become a major element influencing commercial real estate activity. Rising costs for borrowing have dampened the rate of transactions and made refinancing more of a hassle for property owners. 

“When interest rates were extremely low, trading commercial properties were easier because borrowing costs were lower,” Monahan said. “With higher interest rates, they impact returns and in return make deal-making much more difficult.” 

Small businesses emerging into the commercial real estate market face major financial challenges. Many tenants underestimate how long it can take a business to get truly established and become profitable.  

“You need sufficient capital to sustain yourself for 18 to 24 months (about 2 years) before your business truly begins to generate revenue.” Monahan said. “Unfortunately, a lot of the first-time entrepreneurs don't fully understand that.” 

Even with these obstacles, food-service businesses continue to grow across Suffolk County’s retail locations. Quick service restaurants, coffee shops, and constantly shifting food trends are among the most active tenants signing new leases in shopping centers. 

Coverage from Connect CRE also showed steady desire for retail and restaurant properties across Long Island, even as commercial offices continue to acclimate and adjust to changing workplace norms. 

Limitations due to infrastructure affect commercial property development throughout Suffolk County, according to Monahan. Many locations lack accessibly to public sewer systems, which restricts the number of restaurants and other water intensive companies that can operate in certain locations.  

“These challenges affect success and therefore require a long-term vision", Monahan said. 

“Commercial real estate is always evolving,” Monahan said. “To be successful, you have to be able to look beyond what a property is today and understand what I could become in the future.” 

As the economy of Suffolk County continues to acclimate and work itself out after the pandemic, industry leaders say the ability to adapt and plan strategically will remain the main factor for property owners and businesses seeking space in the area.