Why Long Island’s Medical Office Market Is Still Booming — Even With Rising Vacancies

Long Island’s Medical Office Market: Still Strong, Even as Vacancies Tick Up

Vacancy’s up... but so is everything else. Here’s why Long Island’s medical office scene is still thriving.

If you’ve been watching the Long Island commercial real estate market lately, you might have noticed something a little surprising: vacancy rates in medical office space nudged up to 5.7% in Q2, rising 40 basis points from the first quarter. At first glance, that might seem like a red flag for one of Long Island’s historically strongest CRE sectors.

But let’s pump the brakes on panic — because when you dig into the details, it’s clear: the demand for medical space isn’t just steady — it’s surging.

?? Leasing Activity Is Buzzing

Through the first half of 2025, Long Island has already seen 148,820 square feet of medical office space leased. That’s a pretty healthy heartbeat for the sector.

The standout deal? Northwell Health signed for 30,615 square feet at 10 Nevada Drive in New Hyde Park — the largest lease of Q2. And it’s far from the only one.

? From Negative to Positive: Absorption Makes a Comeback

Here’s where things really get interesting: after posting nearly 80,000 square feet of negative absorption in 2024, Long Island flipped the script in 2025. This year, the market saw 53,895 square feet of positive absorption — a clear sign that demand is outpacing supply.

And guess what? That trend’s expected to hold. No new medical office supply is slated for delivery this year, which means absorption should remain in the green.

??? Big Plans on the Horizon

While we’re not getting new medical space this year, developers are definitely cooking up big plans:

• A 90,000-square-foot medical office building is planned for the Garden City campus at Roosevelt Field

• And over in Ronkonkoma, Station Yards is proposing a massive 360,000 square feet of medical office space

Oh, and then there’s this power move: Northwell Health scooped up a long-vacant, 310,632-square-foot building on 22.4 acres at 200 Jericho Quadrangle, with plans to turn it into a new healthcare hub.

?? Record-High Rents — And They’re Still Climbing

With no new supply and strong competition for Class A space, it’s no wonder that rents have climbed to a record $36.06 per square foot. And according to JLL, they’re only going to keep rising.

If you’re a landlord with medical office space, it’s a great time to be in the game.

?? Retail-to-Medical Conversions: Still the Hottest Trend

One of the coolest (and most telling) trends on Long Island? Retail-to-medical conversions.

Stony Brook Medicine is leading the charge, having transformed the former 170,000-square-foot Sears at Smith Haven Mall into an outpatient mecca known as Advanced Specialty Care at Lake Grove.

But they didn’t stop there — they’re also taking over an extra 50,000 square feet that used to house the Sears Auto Center.

As JLL Vice Chairman David Leviton puts it:

“I think medical is driving larger deals on Long Island right now, and it will continue to be the driving factor for Long Island as far as office.”

?? Competition for Talent Fuels the Fire

What’s really driving this boom? According to brokers — it’s all about the battle for talent.

With 257,400 healthcare workers on Long Island as of May, the sector isn’t just healthy — it’s the region’s economic engine. Hospitals are racing to attract top talent, and modern, conveniently located outpatient space is a big part of that strategy.

Even with federal funding cuts looming, Long Island is still poised for growth: healthcare employment is expected to rise by 7.5% between 2024 and 2029, slightly outpacing national projections.

The Takeaway

Vacancy might be up... but Long Island’s medical office market is anything but sickly. From record leasing and rents to bold redevelopment projects and booming employment, the fundamentals are strong and trending upward.

So whether you’re an investor, developer, or just a local keeping tabs on what’s changing around your neighborhood strip mall — know this:

?? Medical office space is still the pulse of Long Island commercial real estate.

Want to stay ahead of the curve on LI’s hottest CRE trends?
Let’s connect — whether you’re looking to lease, invest, or convert an old Sears into the next outpatient mega-center, now’s the time to make moves.

Tags: Long Island real estate, medical office space, healthcare leasing, Northwell Health, Stony Brook Medicine, JLL report, retail conversions, commercial development, Smith Haven Mall, Garden City medical space