Like the rest of the country, the current business climate here is nothing short of stormy.
“The economy on Long Island is still challenged on many fronts,” says Kevin Law, president and chief executive officer of the Long Island Power Authority and incoming president of the Long Island Association. “Whether it’s weaker than expected retail sales, high retail and commercial vacancy rates, and the continuing foreclosures and bankruptcy filings.”
But despite the gloomy forecast, Law can point to some positive news.
“We are seeing some improvements in the residential real estate market,” Law says. “Canon’s decision to locate their North American headquarters in Melville is a big shot in the arm for Long Island. We need to build upon that success.”
The employment picture is looking better than it was a year ago, according to Michael Crowell, senior economist at the New York State Department of Labor’s office in Hicksville. “The trend line is good,” he says. For the Long Island region, unemployment peaked at 7.9 percent in January and has been dropping ever since. In April, the most recent figures available, the rate for our region was 6.6 percent, compared to New York State’s 8.2 percent. Considering there are between 70,000 and 80,000 people currently collecting unemployment benefits at an average payment of $300, Crowell calculated an estimated $21 million is being pumped into the local economy weekly, which is certainly a needed boost.
Although the pain of the recession is still widely felt, Crowell sought to put it into perspective. “The defense industry downsizing in the ’90s was actually worse for us,” he says.
The colossal retreat of Long Island giants like Grumman left our region reeling, but economists say we’re now in better shape because our economy is more diversified. “We don’t need a Grumman-like replacement,” said Gary Huth, labor market analyst for the New York State Department of Labor. “Long Island is fairly well-positioned, if there is growth, to take advantage of it.”
Advances in information technology, health care, and bio-medical science are starting to pay dividends, some analysts say. Another new field is the growing market for cyber-security and green energy.
This past April, our region saw the “first positive job growth since June of 2008,” says Crowell. The private sector created 6,700 new jobs and the local public sector added 1,300 new jobs.
One good measure of economic activity, especially in a consumer society like ours, is sales tax revenue. Both counties showed increases in sales tax revenue this April compared to April, 2009: 15.4 percent in Nassau and 3.5 percent in Suffolk. For property owners, the improvement in the value of their homes is a definite plus. According to the Multiple Listing Service, which tracks residential real estate, the April median price of a newly closed home also rose in both counties, compared to a year ago: 6 percent in Nassau and 0.6 percent in Suffolk.
Of course, problems still remain. And one of the most pressing is the rise in foreclosures. According to RealtyTrac, foreclosure filings on Long Island were 3.5 percent higher in April than they were a year ago, while nationwide the filings declined by 20 percent. The reason is the recession actually started a little later on Long Island than it did in the rest of the country. Bankruptcies in our region also rose 22 percent in March, compared to the same month a year ago, according to the U.S. Bankruptcy Court of the Eastern District of New York.
“I honestly expect to see a wave of foreclosures,” says Mitchell Rechler, co-managing partner of Rechler Equity Partners, who cited the shaky condition of the Island’s once-overheated office market. Now, he says, the vacancy rate is almost 15 percent. “In markets like Melville the rate is probably 20 percent.”
For the majority of Long Island’s Class A office buildings, which typically are multi-story commercial structures with first-class touches and top amenities, Rechler forecasts trouble ahead. The values have fallen and the rental rates have dropped while the vacancies have increased, so the properties are generating less income than projected. “I think 60 percent of the Class A buildings were traded or sold since 2004,” says Rechler. “And every single one of them is going to be in trouble.” But this problem is not unique to Long Island, he says: “It is happening all over the country.”
At the end of the day, Rechler says, “Long Island has its issues, but at the same time we think it’s a great place to do business. We’ve seen it go down its bumpy roads before.”