Throughout the 2010s, New York City’s story had been one of continued growth, optimism, and expansion. With the onset of COVID-19, lockdown measures led to job losses, shuttered businesses, and devastation across key industries like retail, entertainment, and hospitality. MultiHousing News’ Winter 2021 report for Manhattan estimated that, beginning in March 2020, roughly 300,000 residents left the city.
What does the city’s narrative look like in 2021 and beyond?
Demand, both near-term and year-over-year, is up. According to an April 2021 research report by New York real estate company Douglas Elliman, Manhattan rentals saw a 546% increase in new leases (excluding renewals) year-over-year. Brooklyn had the highest number of lease signings since monthly tracking began in 2008.
New York City is no stranger to tough times. During the 1970s and most recently in 2008, the city got hit with severe economic crises, and it hit back even harder to return to prosperity. All signs point to a similar rebound in 2021 as renters and the overall multifamily industry realize anew the value of a city like no other.
As COVID-19 vaccines continue to roll out, New York City’s quiet streets and empty office buildings have been flickering back to life. While workers in other parts of the United States may continue to favor remote work, businesses and professionals in Manhattan are viewing the situation differently. Why work from your couch when you’re living in the Big Apple?
The finance industry has led the way so far. “We’re going to try and make this, frankly, as normal as possible,” Gerry Keefe, head of global banking for the Americas at HSBC Holdings Plc, told Bloomberg. “Although the floors won’t be at the same density as they were pre-COVID-19, we’ll still have a critical mass in place.”
Global leaders like JPMorgan Chase, Deutsche Bank, and Goldman Sachs have resumed their in-person programs for interns and entry-level professionals, long considered stepping stones to lucrative careers, and many institutions are bringing employees of all levels back throughout the summer and fall. Expanding the view beyond finance, Facebook announced the re-opening of its Manhattan office, and a recent survey by Partnership for New York City anticipates that 62% of Manhattan office workers will return to their workplace by the end of September.
The resumption of office work sets off a chain reaction. Bars and restaurants have reopened at full capacity, and subway service runs 24/7 again. Shops, entertainment venues, and other retail outlets eagerly open their doors to receive the ample disposable income these well-paid professionals have saved up during lockdown.
But it’s not just wealthier renters finding a home in the city in 2021. Imagine finding a two-bedroom in Brooklyn for $3,000, a Manhattan loft for $3,995 or a doorman building in Manhattan for $3,482 a month. As the city re-opens, younger workers previously priced out of the city are finding historically low rents. In May 2021, “the net effective median rent in Manhattan, defined as the gross monthly rent less landlord concessions, fell 11.1% year-over-year, to $3,037, but rose by a record 8.8% from the prior month,” Elliman reports.
Current recovery trends bode well for multifamily investors as well. Even before the pandemic, many buyers had been moving their money to the Sun Belt for fewer restrictions and higher yields.
Flash forward to 2021. As these areas face historic inventory shortages—down 66% in Raleigh and 59% in Sarasota, for instance—Manhattan is one of the only markets where for-sale inventory is up: 35%, to be precise. In fact, Douglas Elliman research for May 2021 reports total inventory in Brooklyn up 478.3% (year-over-year). Furthermore, pricing power for markets such as New York City, remain below historic levels.
As for the fabled COVID-19 flight from New York City? This story of New York has been misunderstood and overexaggerated. “There is a shift within the region, and between asset classes, there’s more a flight to quality than a flight from the city,” Ian Hawk, Walker & Dunlop Senior Analyst, explained.
During the pandemic, some millennial renters already eyeing the suburbs for family life simply moved, which shifted their timeline up by three to five years. This timeline acceleration impacted everything from city and suburb demographics to trends in e-commerce and the industrial space. As the city recovers, suburbanites at a later stage in life have been selling their homes at record prices to return to the city as renters. Many of these renters have the money to afford the New York City lifestyle they want: amenity-rich buildings in prime locations. “Market share of luxury market concessions continued to be less than in the remainder of the market,” Douglas Elliman reports.
Such a flight to quality is taking place in the suburbs as well. Whether they’re Manhattanites looking to get more bang for their buck or well-off suburbanites nevertheless priced out of the post-COVID-19 housing boom, many renters are willing to pay for larger units and more amenities in the regions surrounding New York City.
They’re looking at Class A properties like The Mariner in the heart of downtown Port Chester, which offers direct access to midtown Manhattan, a fitness studio, concierge service, a landscaped roof, and spacious units with premium fixtures and finishes. The property was a deal for its buyers as well. “This sale represented a very rare opportunity to acquire a luxury residential asset in one of the nation’s highest barriers to entry metropolitan areas,” Hawk said.
Even as many New Yorkers return to the city, the suburban multifamily market remains strong, even growing, in many communities. “Properties in Jersey City, NJ, Nassau and Suffolk, Long Island, and Bergen County, New Jersey, have been leasing up at an impressive pace, and Bergen County and Hackensack have been seeing a lot of development due to incentives like tax pilots and abatements,” said Thomas Walsh, Walker & Dunlop Managing Director.
“We’re seeing deals, transactions, and institutional momentum in Stamford, Connecticut, and a considerable amount of demand for anything towards the beach or Jersey Shore, like Asbury Park or Belmar,” said Walsh.
“While rent drops have facilitated great deals and better apartments for people to pick up and move—largely upper- and middle-class professionals—they haven’t made a dent in increasing the stock of truly affordable housing,” New York Magazine reported in May.
Affordable housing has long been a complex problem and urgent need in the metropolitan area, further complicated by New York City’s unique set of regulatory challenges. On the positive side, candidates across the board in city elections, including the mayoral race, have expressed a strong commitment to affordable and workforce housing. Meanwhile, GSE programs have been providing support throughout the pandemic. In September 2020, for example, Walker & Dunlop structured $87,429,870 in Fannie Mae financing to preserve 710 units of workforce housing throughout Monmouth, New Jersey.
For the multifamily sector overall, the future looks bright. In April, Queens reported the highest market share of new development listings in 18 months, and New York City’s forward development outlook increased the most of any city in the nation.
The Partnership for New York City reported that as of May 2021:
All of these positive indicators are making their presence known in the multifamily sector. “We’re seeing tremendous transaction activity year-over-year, with strength across price points,” said Hawk. Multifamily is back in New York City—and for those who recognize all the city has to offer, it never left.”