NYC Apartment Rents Are Dropping As Residents Leave In Droves
Apartment rents across New York City have been falling since March, and it could be a long time before they start to pick up again.
As people leave the city in droves, demand for rental units is down significantly and rent prices have taken a hit. With tens of thousands of new units currently in construction expected to hit the market over the next 18 months, experts anticipate rents will continue to drop well into 2021.
“New York gets hit hard in times like this, because it's mostly renters,” said Joy Construction principal Eli Weiss, whose company owns multifamily properties in Manhattan, Brooklyn, Queens and the Bronx. “We’ve always depended on the transient types.”
In Manhattan, where the drop has been most drastic, average rents have gone down 6.4% from March to June, according to data compiled by MNS Real Estate. In March, when the crisis first hit New York, the average Manhattan multifamily rent was at $4,174, up 0.73% from February. It reached its lowest point since the crisis began in June, when rent prices hit $3,907.
In Brooklyn, rent prices dropped 5.7% from March to June, while rents in Queens dropped 0.8% and rents in the Bronx dropped 1.2%.
“We are seeing price drops to be competitive because of this large supply of inventory across the boroughs,” MNS Vice President of New Development Stephanie Andrews said.
Weiss said he has seen a 30% to 40% drop in demand since the coronavirus hit.
The excess supply has been left behind by people leaving the city, temporarily or for good. College students who will start remote learning at the end of the summer haven't come, many young families are moving out in search of space, and without New York City’s nightlife, young adults are moving back in with their parents to wait out the pandemic, sources told Bisnow this week.
Despite a drop in demand, the introduction of new units into the market has continued. There were 1,300 units delivered in Q2 and 7,300 new units over the past year, according to property management software company RealPage. Some 21,500 more apartments are expected to come online over the next year and a half.
"Our forecast for metro New York says occupancy continues to trend downward a little bit through the middle of next year," RealPage Chief Economist Greg Willett said. "In turn, we’re going to have a little bit further rent cuts."
Manhattan rents have been driven down the most because the borough has had the most increase in supply. The demographics that have made this borough their home have also been more likely to leave the city amid the health crisis, sources say.
Between March 1 and May 1, nearly 5% of New York City's entire population had left the city, according to data from The New York Times. The greatest volume of flight was from Manhattan’s richest neighborhoods, including the Upper East Side and the West Village.
"With Manhattan, in areas that are more affluent areas, we’re seeing more impact in these areas because [the residents] have second homes," Andrews said. "They have that opportunity to stay out of the city for longer."
Young people who lost jobs in service and the arts, as well as those who are able to work remotely, have left New York, too. That has led to an increase in vacancies in studios and one-bedroom apartments in neighborhoods, such as the Upper West Side, Midtown and Chelsea, that are typically filled with college students and young people, Andrews said.
“We’re seeing those pockets and areas, where traditionally the student population flock to, where [excess supply] is more apparent,” she said.
Weiss said he is seeing this in his Manhattan market-rate apartments. Bringing students back to the city will be a huge factor in improving the multifamily market, he said.
“The key to getting people back to New York is getting the universities up and running,” he said.
Other areas with a more mixed demographic, such as Williamsburg in Brooklyn, haven't seen as much of an exodus, Andrews said.
Andrews said MNS is collecting the supply numbers for July now, and she expects rents will be even lower than June. July is typically the best month for multifamily leases, she said.
Affordable housing units have not seen the same decline in rents and demand since March. Lemor Realty Corp. President Kenneth Morrison, an affordable housing developer in Harlem and the Bronx, said rent in his affordable housing units has remained stable. He has seen very little increase in vacancies, he said.
Weiss said there has been much less turnover in the 2,800 affordable housing units Joy Construction manages in the Bronx and Brooklyn.
“Affordable housing is always more stable,” he said.
Weiss said some of the residents who chose not to renew their leases said they were leaving New York for the time being, but that they would come back in a year or two.
The coronavirus pandemic has clearly driven the exodus, and with it, the rent decline. Multifamily experts said once the crisis is over, they believe demand will come back.
“The tide can go out quickly, but it will come back in just as quickly,” Weiss said.