Long Island, as the colloquial term for Nassau and Suffolk Counties immediately to the east of New York City, has long been argued as the first and prototypical modern American suburb. While the economy has remained strong, Long Island–like many other prominent suburbs–has faced a challenge curbing the exportation of young talent in recent years. Suburban businesses in the affluent region home to over 2.8 million residents are putting an increased focus on real estate, both office and residential, to attract and retain millennials.
Roughly 30 miles east of Manhattan rests the Nassau County hamlet of Levittown, where in 1947 the community’s namesakes Abraham and William Levitt of Levitt & Sons built 17,000 detached houses through an assembly-line construction technique targeted for America’s post-World War II burgeoning middle-class. As a result of strong demand for housing, an extensive infrastructure network put in place by Robert Moses in the first half of the century and pro-homeowner legislation like the Servicemen’s Readjustment Act of 1944 and Housing Act of 1949, the project was a success and spawned three other “Levitttowns in the U.S. and Puerto Rico, along with copycat planned communities across the country. In 1998, TIME magazine named William Levitt as one of the 100 “persons of the century” and “creator of suburbia.”
Today, Long Island is fighting an uphill battle attracting and retaining upwardly mobile young professionals that once flocked for the region in pursuit of the American Dream. With strong employment growth in the New York metro region, New York City saw an 11 percent growth in its millennial population from 2010 to 2017 compared to 3.8 percent in the U.S. and 0.8 percent in suburbs on average. Over the same period, Long Island’s millennial population decreased by 2.7 percent.
The challenge Long Island has had in keeping and attracting millennials may come as a surprise considering that Long Island has generally outperformed other American suburbs in terms of employment since 2004. Of the 321,700 jobs added to the New York metro area outside of New York City since 2004, 40 percent are on the Island. Office leasing has remained strong, with an overall office vacancy rate of just 10.7 percent within 34.7million square feet of inventory at the end of 2018.
So where is the market softness challenging millennial population growth, and what gone be done about it?
Cushman & Wakefield analysis finds that while professional services sector jobs have boomed within Long Island’s employment base over the last decade, financial sector employment has been much more subdued and information sector employment has sharply declined. This does not contend well with conventional wisdom and studies from LinkedIn suggesting that millennials’ desire jobs in tech and financial services. While Long Island has seen strong employment growth in education and health industry sectors, it’s clear that to attract this talent, Long Island must do more to entice employers from the information and financial services sectors.
In addition to a well-educated and robust talent pool, these employers seek office space that can reflect their culture and influence collaboration. Long Island and other suburban owners have been slower to adapt to these changes in preferences, often facing local legislative and density challenges to easily developing new space. In recent years, however, the real estate community has been mobilized to address the issue and made significant strides in the right direction.
“While the market is more favorable for landlords right now, we’ve seen owners and developers apply aggressive strategies to modernize the workplace environment within their properties,” said Rob Kuppersmith, a managing director in Cushman & Wakefield’s Long Island Office.
“There has been a strong response on the Island to residential product designed to support ‘live-work-play’ or conveniently located in village downtowns in walking distance to the LIRR and a variety of hospitality and leisure attractions. In response, we’ve seen office landlords and developers advance similar product hoping to attract new businesses to the region and remain competitive when market conditions become more challenging.”
In 2018, Nassau County office investment sales dollar volume was higher than any year since 2009, and Suffolk County only trailed 2017’s total over the same period. With robust investor interest, there is reason for optimism that existing office product will be updated to attract new employers—especially those most desired by millennials.
Less than five years ago, 515 Broad Hollow Road in Melville was a 192,000-square-foot mixed-use property primarily used as industrial warehouse space for Restaurant Depot. Following reinvestment by the Long Island-based owner, construction was recently completed to convert the industrial space to collaborative Class A office with amenities including an outdoor courtyard with WiFi access and pickle-ball courts. Renovations were made to the rest of the building to attract and retain service providers including a pool and fitness club, golf clinic and lively restaurant and bar. The conversation raised eyebrows in an extremely tight industrial market, but the updated building has been immediately met with strong tenant interest from a wide range of sectors, including information and financial services.
“High property taxes and construction costs along with complex municipal regulations and structures have at times challenged Long Island and similar suburbs in quickly responding to changes in tenant preferences,” said David Pennetta, Executive Director for Cushman & Wakefield’s Long Island Office.
“Recent private investment and public sector support for re-imagining Long Island’s office stock has been met with enthusiasm from tenants. Paired with the region’s enduring assets, including a strong labor pool, diverse business environment and extensive infrastructure network, a reinvigorated office sector strongly positions Long for continued growth.”