After its biggest upheaval in a decade, New York’s apartment rental market looks primed to rebound as the city slowly emerges from its COVID coma.
Real estate giant Douglas Elliman released its February rental market report yesterday (Thursday) noting a major surge in leasing activity as renters jockey for a place in what was one of the world’s hottest markets, before the coronavirus sparked a migration from the city and brought the apartment sector to a grinding halt.
But with the numbers indicating that Manhattan hasn’t lost its appeal, experts predict the corner has been turned.
“The ‘fleeing the city’ narrative that suggested Manhattan would be a bleak dystopian hellscape after the lockdown really needs an update,” said appraiser Jonathan Miller, whose firm prepared the report for Douglas Elliman.
“The market return is predicated on consumers feeling safe in the city. There has been notable progress on that in recent months as the vaccine distribution has surged and infection rates have fallen sharply.”
The February report shows landlords have dropped their prices and upped their concessions, offering two or more months free rent, depending on their building’s vacancy.
The result has been a 112.4 percent spike in signed leases compared to the same time last year. Even at the cost of an 11 percent drop in actual rents, the experts agree momentum is building for a return to normal.
Hal Gavzie, Elliman’s executive manager of leasing, noted that the sharp drop in rents and tempting concessions has produced month-by-month increases in leasing volume since the fall.
“It looks like the rent reductions have now stabilized and, barring any unknown scenario, it is all heading in the right direction,” said Gavzie.
“With the vaccine rollout well underway, people are getting more comfortable and the city is getting busier. So much is tied to the commercial component but, as the restaurants, arts and theaters start to reopen, I am optimistic that we will have a nice velocity in the market this summer as people seize this opportunity in the market.”
Elliman’s February rental report recorded the largest number of new monthly lease signings since the financial crisis with net effective rent sitting at $2,843 a month as over 40 percent of city landlords looked to secure tenants by shaving payments.
The last time Manhattan rents were under $3,000 was 2012. But the price chopping has helped eat into the apartment inventory.
According to Elliman, there 11,750 empty market rate apartments in Manhattan compared to around 5,000 just ahead of COVID. Although that number is nearly triple year-ago levels, Gavzie noted it has gradually been dropping since the fall as previously price-constrained first-time renters grab their chance to live in Manhattan and city families upgrade to bigger spaces.
Notably, concessions at the luxury market are nearly half that of the non-luxury market, according to Elliman, a phenomena that Miller categorizes as “characteristic” given unemployment has skewed heavily against lower wage earners, who tend to be in the rental versus sales and in the entry level rather than other housing tiers.
Overall, Miller said, “The fact that new lease signings have surged year-over-year to records for each respective month since October suggests early signs of an improving market.”
The numbers augur well with a report from Bloomberg News yesterday that suggested many of the Wall Street A-Listers who fled to Florida are now eying a return. Missing the nightlife, arts, private schools and social events just now starting to be revived, the wealthy want to be back in the heart of the nation’s confirmed financial capital.
Equity residential, one of the city’s biggest market rate landlords, is also optimistic that the city has turned a corner.
In the company’s year-end report, CEO Mark Parrell said, “We are optimistic that 2021 will be a year of recovery. Our affluent, well-employed resident base remains drawn to our nation’s great cities and we expect demand to accelerate and pricing to continue to improve as vaccines are widely administered and cities become more active.”
Equity reported that its rents had stabilized and even seen “modest improvement” in the past two months. The company has now begun to “moderate” its concession offerings as its portfolio-wide apartment occupancy levels show significant signs of improvement, led by New York where it has 6,657 apartment units.
Attorney Pierre Debbas of Romer Debbas, who handles conveyancing for many of the city’s well-heeled, said that a combination of pent-up demand from last year, the vaccine roll-out and New York slowly lifting many of the restrictions that have taken the sexy out of the city “speaks to the confidence people have New York.”
He added, “Not even one quarter into 2021 and I am seeing the Manhattan residential market more active than I have in my entire career. All of a sudden there is a tremendous sense of urgency as pricing has adjusted slightly and buyers and renters think they are getting a deal. They are now in a rush to secure a property knowing that it is only a matter of time till the city rebounds.”
That rebound, according to Gavzie, will unfold over the next 18 to 24 months.
“I think with the overwhelming amount of vacancy we have seen it will take a while to eat through it,” he said. “While there are a lot of variables, I think that, after the summer, we will see the metrics spike in the right direction.”