NYC Apartment Owners Seize On Burst Of Activity As Market Stabilizes
The New York City rental market has been in a world of pain for a year, but spring has brought a sense of optimism for landlords as plummeting rents have begun to stabilize.
Residential rents aren't improving yet, recent market data shows, but their extraordinary descent has slowed. Most encouragingly for the apartment owners is that lease signings are picking up, an indication that the demand is starting to return after months of soaring vacancy rates as renters left the city and few newcomers came to fill their place.
“April is the strongest month we’ve had since the start of the pandemic,” Slate Property Group co-founder David Schwartz said. “There’s this energy and excitement in the city that you can feel in the air.”
Schwartz and his landlord peers are operating off a low baseline. Manhattan median rent was just below $3K last month, 14% down on what it was a year ago, Miller Samuel CEO Jonathan Miller told Bisnow. In the fall, rent was down by closer to 20% to 25% from the year before, meaning the rate of decline is still there, but slowing, per Miller.
Rents and concessions have met the market, as renters have started to sign deals in earnest. Manhattan had the highest number of new lease signings in March since Miller began tracking in 2008, though leases are including an average of two months free rent. New leases signed in Brooklyn picked up, too, jumping an incredible 76% from March 2020, though rents slid again, falling by 10%.
The market is what Miller describes as “extremely weak,” but he now thinks the worst could be in the rearview mirror.
“Everything is starting to moderate, the peak weakness seemed to be at the end of last year and beginning of this year, and now that's starting to dissipate a bit,” he said. “It's been six straight months where new leasing activity has been a record for the particular month since the financial crisis, so that's encouraging. But nothing matters until we see the continued accelerated rate of vaccine adoption.”
Nearly 25% of New York residents are vaccinated, per state government figures, with everyone over 16 now eligible for inoculation. Still, the nation’s immunization effort hit a roadblock this week, with regulators halting the Johnson & Johnson shot amid blood clot concerns.
And aside from the immediate health crisis, the business community has brewing concerns the state's increased taxes on wealthy residents will further accelerate a trend of outward migration from the city, reducing demand for New York City apartments.
But Schwartz said he isn't worried about that. He said he has felt a general sense of improvement since the presidential election, and said he noticed the apartment sales market starting to stir back in December.
“The condo market has been hot, because people are saying, ‘Look, if I'm going to be in New York, I might as well try to get a better deal now,'" Schwartz said. "I think you're starting to see that with renters: They’re saying, ‘if I could get in now and get a good lease, I might as well take it, and not wait until August when everybody's returning.’”
That official return is what everyone is waiting on. A survey of major city employers run last month by the Partnership for New York City found that half do not expect to return until September, and remote work will be a major factor in their long-term plans.
Last week, JPMorgan Chase CEO Jamie Dimon told shareholders the company would "significantly reduce" its office footprint in the coming years as it overhauls the design and usage of its workplaces. The bank, alongside other major players like Yelp and PwC, is looking to sublease a large chunk of space in Manhattan.
Still, Corcoran rental and sales broker Molly Franklin said she is starting to help find homes for people whose employers are giving them relocation packages to return to the city.
“People are coming back and sure, there are deals that are going to happen right, now, but some money is better than no money,” she said, adding that many renters are taking the opportunity to trade up to bigger, better places.
“In the summer, we will start to see [concession packages] go away, but I think part of the appeal right now is [people saying] ‘I couldn't have afforded this two years ago, and now I can afford this neighborhood, now I can afford to make this move.’”
There are many who are not in that position, however. New York City’s unemployment rate was at more than 13% in February, per the Department of Labor — still well above the national average, and some people are months behind in rent, a situation of which many landlords bear the brunt.
“It's not all great just yet, it definitely is not,” said Shaun Covington, the founder and president of Covington Realty Services, which owns around 400 units in the Harlem area, many of which are rent-stabilized. "I do see light at the end of the tunnel."
He said he is seeing some uptick in people looking around at the higher-priced apartments, but that is standard fare for this time of year. He has some residents that have been unable to pay for housing since the start of the coronavirus pandemic, and while many weren't able to access the state’s first round of rent relief, he is hopeful the new funding will quickly get to the people who need it.
The New York state budget, passed last week, finalized the Emergency Rental Assistance program, totaling $2.4B — including $2.3B in federal funds and an extra $100M in state dollars.
“I think this rent relief package, when put in place, will be very helpful," Covington said. "That remains to be seen, how that's going to be played out … [But] it's going to take a little longer, a few years, at least, before we actually get back to the point where we were.”
Nelson Management President Robert Nelson said the summer and fall were the most difficult periods for his business.
“There was a period of time when people were just moving out, not even having discussions with us about renewing their lease," Nelson said this week.
The company has lowered rents, offered months free in an attempt to keep the building full. Now it has less inventory on its hands, and it is beginning to have internal company discussions about removing concession packages altogether.
“You see the leasing activity, you hear about people moving back into Manhattan," he said. "It just seems like we're at an inflection point."