Long Island Commercial Real Estate Market Update – Q3 2025
The Long Island commercial real estate market recorded $374 million in sales volume in the third quarter of 2025, with 179 closed transactions with an average sale price of $3M. The average cap rate was 7.2% spread across all asset types due to buyers adjusting to higher interest rates compared to the past 5 years.
Sector Performance
Long Island’s office sector showed signs of recovery in Q3 2025. Vacancy remained elevated but improved to roughly 13–14%, dipping below 14% for the first time since 2022. Healthy leasing activity has boosted absorption and helped reduce availability. Asking rents reached record highs (averaging in the low-$30s per square foot), reflecting increased demand for quality space. Cap rates have drifted upward into the upper-single-digits (around 7–8%) as high interest rates prompt cautious underwriting. Overall sentiment is more optimistic than a year ago—a “flight to quality” is underway, and landlords report a more stable, confident office market heading into year-end.
The industrial market remains a standout performer. Vacancy held roughly flat in the mid-single digits (around 5.4%), plateauing after a slight rise earlier in the year. Tenant demand for warehouse and logistics space is still robust—Q3 leasing was strong, especially in Suffolk County, even as net absorption was roughly flat. Asking rents hit fresh record highs (approaching $19/SF on average), with particularly sharp rent growth in prime submarkets. Investor interest remains high for well-located industrial assets, though cap rates have inched up moderately in light of financing costs. Market sentiment is positive, bolstered by limited new supply and sustained demand drivers. Even amid economic headwinds, Long Island’s industrial sector is viewed as resilient, with developers proceeding on select projects—including the region’s first spec cold storage facility—to capitalize on future growth.
Retail real estate on Long Island continues to demonstrate steady strength. Retail vacancy is the lowest among major property types, with availability in the low single digits due to a dearth of new development. This high occupancy, coupled with solid consumer spending, has kept rents on a gentle upward trajectory. Landlords of well- located shopping centers and storefronts report stable or modestly rising rents as demand holds up for essential and experiential retail. Investment activity has been healthy: properties are generally trading at cap rates in the mid-6% range, reflecting continued investor confidence in Long Island retail’s cash flows. Overall sentiment is cautiously upbeat—while e-commerce and interest rates remain long-term considerations, current metrics underscore retail’s resiliency in this market.
The multifamily sector remains a highly robust corner of Long Island’s market. Occupancies are very strong, with vacancy rates well below national averages and most quality apartment communities effectively full. After several years of rapid growth, rent increases have moderated: rent growth flattened over the summer (even turning slightly negative month-to-month during the typical Q3 lull). Year-to-date, asking rents are up about 1–2%, indicating a plateau as tenants absorb prior rent hikes. Even so, overall market sentiment for multifamily is positive. Long Island’s housing demand remains intense and new supply is limited, which keeps fundamentals solid. Investors continue to target apartment assets—cap rates here remain the lowest of any sector (generally in the low- to mid-5% range for stabilized deals) given the asset class’s stability. In sum, the multifamily market is firmly healthy: occupancy and collections are strong, and participants remain optimistic as financing costs temper aggressive price growth.
Major Deals of Q3
One of the largest deals of Q3 2025 for Long Island commercial real estate was 125 Spagnoli Road in Melville, which is a proposed hotel redevelopment that sold for $21M in July. Following this was the $8.2M sale of the Chalet Inn 44 Room Motel in Centerport, which also sold in July 2025. One of the more notable deals within the South Shore was the former Grill Fire on Sunrise Highway in Merrick, which closed for $2.73M and will be the new home of TAO.
Market Outlook
Long Island's commercial real estate market demonstrated broad resilience through Q3 2025, with positive momentum across all major property types. Industrial and retail continue to lead on fundamentals, while office is showing its most encouraging recovery signals in years and multifamily remains a top target for yield-focused investors navigating a high-rate environment.
For owners, Q3 reinforced a clear theme: well-located, quality assets are commanding premium pricing and strong demand, while properties that lag on condition or positioning face a more selective buyer and tenant pool. Proper pricing strategy remains essential — but for those with the right product, this market is actively rewarding it.
At North Village Realty, we specialize in seller representation and provide tailored strategies to maximize your property’s value. If you are considering selling or want to understand your asset’s place in today’s market, contact us today for a complimentary Broker Opinion of Value (BOV).
Article by Tom Bigansky, Managing Broker – North Village Realty
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