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NYC Apartment Rents Are Climbing Again Amid Record Activity

Residential rents nose-dived by as much as 20% in New York City in the thick of the coronavirus pandemic last year, but the market's recovery is well on its way as leasing rates reach new highs and rents rise again.

“We're seeing, even though rents are down year-over-year modestly, what I would call the Covid discount has been narrowing,” Miller Samuel CEO Jonathan Miller said. “And this is all happening despite the fact that corporate America hasn't called their employees back.”

The vacancy rate in Manhattan hit another high last month.

The average rent in Manhattan in July went up 4% from the month before to hit $3,841, according to a report from brokerage MNS released Thursday. Prices went up in Brooklyn, too, with the average rent up to over $2,800, an almost 3% jump.

“We were looking at rents last fall and the early part of this year being something like 20%-25% below pre-COVID levels — and that initially pulled in a lot of traffic into the city, combined with the vaccine adoption,” Miller said.

June had the most new lease signings in Manhattan since Miller began tracking the market 13 years ago, he said. Listing inventory has gone down by 50% since the start of the year and concessions are at their lowest level since last August.

“This [rent rise] was not anticipated, and I think the change in outlook was because of vaccine adoption,” he said.

In the past few months, some major city employers have asked their workforces to return, and at most others, employees are expected to eventually be in the office at least some of the time. Some are taking a hardline approach; Morgan Stanley's CEO in June said he expects New York City employees to be at their desks after Labor Day.

The rise in cases nationally driven by the contagious delta variant has many asking if that will slow the anticipated fall return to work — Google, Apple and Amazon, all of which have large Manhattan office footprints, have all pushed returns back to October or later — but so far the variant appears to be a bump in the road, not a major obstacle, when it comes to the pace of city renting.

“It is not something to be ignored, but at least at this point, the other forces at work seem to be more powerful, which is demand and the future upside caused by corporate callbacks,” Miller said.

Right now, around 55% of the city’s population is fully vaccinated; neighborhoods like Far Rockaway and Bedford-Stuyvesant have the lowest vaccination rates, per Bloomberg. Cases of the virus are increasing fastest in parts of the country with low inoculation levels.

This week, Mayor Bill de Blasio said his office strongly encourages vaccinated people to wear masks inside in places they could be exposed to unvaccinated people, but he stopped short of a mandate. However, the city is introducing a vaccine mandate for indoor dining, gyms and performances.

Mayor Bill de Blasio at a press availability Feb. 10, 2021.

Among apartment brokers, the feeling is that the days of jaw-dropping rental deals are over.

“Starting even in April, if you had a good apartment, we were starting to see bidding wars … That hasn't been normal in roughly five years,” said Molly Franklin, a Corcoran rental and sales broker. “It's coming back, and there's not enough supply for what people really want."

As for the recent surge of the variant, Franklin said until measures beyond masking and mandates are enforced, she doesn't expect it to dampen the market much.

"I think [delta] is scaring people, but I don't think it's changed enough policy yet," she said. "Like, we're not seeing that schools are going to be mostly remote.'”

Columbia University is returning to in-person instruction in the fall, and New York University is returning to mainly in-person classes without any capacity reductions, per its website. In May, New York City said remote school would end this school year, a decision that was seen as a line in the sand for many New York City businesses that have delayed putting in place formal arrangements for the return to work and a big boost for landlords.

“At the end of the day [New York City] is the safest place, probably, you could be in the country right now,” said MNS CEO Andrew Barrocas, whose company handles leasing of 21,000 units in Manhattan, Brooklyn and Queens.

He said during the pandemic, Manhattan took the biggest hit with prices, but has come back the strongest. He said mandates, like newly introduced requirements for vaccinations for indoor dining and gyms, are adding to a sense of certainty for the market. Plus, he said there is pent-up demand from young people who are moving to the city for the first time and looking for a place to live.

“Last year, everybody who graduated college moved in with their parents. Then you've got the class of 2021 that graduated … all looking for apartments, all at the same time," Barrocas said. "You have twice as many people looking, and that's why pricing has gone up and concessions have dropped.”

Manhattan's condo market has been oversupplied for several years.

Rick Lapidos, Taconic Partners' senior vice president of residential asset management, told Bisnow via email that net effective rents at its Manhattan properties are up this year by 15% to 25% depending on unit type. Two-bedroom net effective rents have increased the most lately, and the summer “surge” was greater than expected.

“We stopped [giving rental concessions] at the end of June, beginning July, and that's because that’s when the return to work was announced,” said Keith Gordon, the managing partner of NCV Capital Partners, a for-profit affordable housing developer and manager with hundreds of units in the Bronx and Harlem. "A lot of people had left the city and were scrambling to find a place to get back."

Certainly, there is a sense that New York City is back open for business. Broadway is expected to fully reopen starting Sept. 14, and last month de Blasio announced a series of concerts will be held in each borough to celebrate the city. In June, NYC & Co. revealed it would run a $30M tourism campaign in an attempt to lure tourists back to the city.

“People are no longer using concessions, there is some upward mobility on rents, and activity has picked up across the board in both the Bronx and Manhattan," Gordon said. "We’re hoping the delta variant doesn’t rain on the parade.”