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New York Rents Fall as Vacancies Rise
Thousands of New York renters left the city because of the coronavirus, and rents have finally started to go down.
The coronavirus lockdown has hit New York City’s rental market hard, driving Manhattan vacancy rates to their highest level in 14 years and pushing the number of June new lease signings to the lowest level seen in nearly a decade, according to a new report from the brokerage Douglas Elliman.
In late June, after roughly three months of coronavirus lockdown and after thousands of New York renters left the city to shelter elsewhere, real estate brokers started showing apartments to prospective renters again, a shift that many landlords were optimistic would revive the spring’s sluggish rental market.
But the latest numbers show that vacancy rates are now at 3.67 percent compared to 1.61 percent in June 2019.
Manhattan median rental prices, meanwhile, dipped 4.8 percent compared to June of last year, to $3,378 a month, wiping out the increases of the last few years. Concessions were up, too, both in the percentage of listings offering them and the amount of the concession.
“The shutdown basically froze pricing at March/April levels,” said Jonathan Miller, a New York appraiser and the author of the report. “When a market is shut down for safety concerns, there is very little transparency. The reopening the last eight days of June were too short to really have an impact on monthly results, but more weakness in the market will be revealed when transparency increases.”
The reopening allowed in-person property showings and persuaded many landlords to list properties last month, hopeful that pent-up demand would drive lease signings. In Manhattan, listing inventory jumped 84.7 percent compared to June of 2019, with 10,789 rental properties hitting the market. But renters aren’t biting, at least not yet: just 3,171 new leases were signed, down 35.6 percent compared to 2019.
Gary Malin, chief operating officer of the Corcoran Group, pointed out that there would naturally be some lag time between a listings surge and new lease signings, especially because the reopening happened right before the Fourth of July. But, he added, there was no denying that the coronavirus had been a “shock to the system.”
“The June rental data should not come as a surprise to anyone,” said Mr. Malin. “For the last three months we could only do virtual showings.” There is also uncertainty because start dates for many new jobs have shifted while others have been told they can continue to work from home at least until Labor Day. “The market has to reset itself.”
Still, given the imbalance in the market, that reset will almost certainly accelerate what have, to many renters’ disappointment, so far been very minor price adjustments and concessions.
John Walkup of UrbanDigs, a real estate data firm, said nearly 1,500 new Manhattan listings came on the market the week of the reopening, about 500 more than you’d see in a normal June. “And while we’ve seen a slow but steady increase in leases signed, it’s low compared to last year, so the question is ‘What will happen with that excess inventory?’ ”
“Everything is supply and demand,” said Mr. Malin. “And there’s a lot of supply but much less demand. Now that everyone is beginning to see what is out there, owners will modify their prices. But most landlords are not going to make a quick decision to do a big price cut. They’ll see what the numbers are, what the traffic is like, what the offers are.”
In Queens, median rental prices in June were down 5.7 percent year over year, to $2,700 a month, according to Douglas Elliman. Brooklyn rental prices were essentially flat, but there were more and deeper concessions in each borough and they showed the same imbalance as Manhattan, with huge increases in new listings and annual declines in new leases.
While lease signings are expected to pick up in July, that may not extend to all segments of the market. Larger, luxury apartments, for example, saw some of the biggest price drops over the last few months, a phenomenon Mr. Miller attributed to the high-end market being more mobile. And wealthy New Yorkers who left the city when the pandemic hit and are comfortably ensconced in country homes for the summer are unlikely to rush back to sign new leases before fall.
It’s too soon to know how many of those who left the city will relocate permanently, but the ongoing uncertainty of the coronavirus situation — especially the announcement on Wednesday that the city’s public schools would open only part-time in the fall — may mean that other renters will delay their apartment hunts as well, especially if they have the flexibility to do so and don’t find the current rental prices compelling.
“It’s certainly not a strong or normal market by any stretch of the imagination. Prices are falling, concessions are rising, the amount of concessions are rising,” said Mr. Miller. “Everything is weakening. In many ways, I think the rental market could be hit way bigger than the sales market.”
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