- Manhattan apartments haven’t seen rents this low or vacancies this high for close to a decade or longer.
- The borough’s median rent just fell below the $3,000 mark for the first time in nine years, per StreetEasy, while the vacancy rate hit 5.75%, per Miller Samuel.
- Experts on the local real-estate market from StreetEasy, Miller Samuel, and UrbanDigs said the market will recover eventually, but it won’t look the same when it does.
- “The landscape of the New York City rental market has really changed drastically and this quarter has been one of the first of many milestones to come,” said Nancy Wu, an economist at StreetEasy.
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More than six months into the coronavirus pandemic, Manhattan’s rental apartment market isn’t just struggling, it’s historically bad.
The borough’s median rent just fell below the $3,000 mark to its lowest point in nine years, per a report by StreetEasy, after 44.7% of its rentals were discounted in the third quarter. In addition, landlords cut a median 9.1% off their asking rents, $139 more than the same time last year.
Manhattan had a vacancy rate of 5.75% in September and 15,923 available listings, “the highest we’ve tracked in 14 years,” said Jonathan Miller, president and CEO of local real-estate appraisal giant Miller Samuel, per a report jointly conducted with Douglas Elliman.
Business Insider talked to professionals and experts at both StreetEasy and Miller Samuel, as well as UrbanDigs, and they said that while the borough won’t stay quite this empty, lower rates and higher vacancies could well be the new normal, even after the pandemic lifts.
“The landscape of the New York City rental market has really changed drastically and this quarter has been one of the first of many milestones to come,” said Nancy Wu, an economist at StreetEasy.
Record high vacancy rates
The catalyst for all the empty units in Manhattan is obvious: Many renters have left the former global epicenter of the virus, but some seasonal dynamics have worsened the glut of apartments.
While the dip in rent has brought in some younger renters who had previously been priced out, Miller said, an encouraging sign, he said it’s clear that the outflow is still higher than the inflow.
John Walkup, the COO and cofounder of UrbanDigs, pointed out to Business Insider that typically, leases in Manhattan end in June, July, and August, which in the midst of the pandemic, brought a lot of empty units onto the market at once.
“The supply is overwhelming at this point,” Walkup said, especially when it comes to the smaller units.
Per Miller’s report, the net effective rent for studios in September was down 17.1% year-over-year, while it was down 14.7% for one-bedrooms.
The story is different for larger units — the net effective rent for two-bedrooms was down 3.3% in September, and it was down 5.4% for three-bedrooms.
“I think the big reason for this is because the unemployment picture is heavily skewed toward lower-wagers,” he said.
Furthermore, beyond unemployment, the structural change that the pandemic has brought to the labor market is likely to change the calculus for Manhattan landlords long after the pandemic.
Experts don’t see renters coming back full-swing in the post-pandemic market
Not only has the ability — in fact, the requirement — to work from home given renters the option of moving to new markets, but it has effectively put Manhattan on the same footing as outer boroughs Queens and Brooklyn — except those typically boast bigger and more affordable apartments.
While there have been many discussions about the migration trend from New York City to the suburbs, Miller said he’s actually seen a migration from Manhattan to the outer boroughs as well as the suburbs.
“Zoom isn’t going anywhere,” Miller said. “So after the pandemic, I think general pricing in the rental market will not be the same because renters that normally could be counted on don’t necessarily have to live in close proximity to where they work.”
If anything, Miller added, the pandemic’s effect on the rental market was needed before 2020. “The rental market is going through a price reset,” he said, something he views as “being overdue by at least three years.”
Three years ago, Miller continued, the rental market exceeded an “affordability threshold,” or the percentage of household income that typical renters could afford to allocate to their housing. While he acknowledged that rents may continue to reset in the foreseeable future, he said he doesn’t think this is a “downward trajectory with infinite capacity.”
As Wu put it, for Manhattan to fully bounce back, the math is simple: The number of inbound renters will have to exceed the number outbound renters.Wu said that won’t happen until after the pandemic, but it’s still unclear just how long after that it will take.