The circumstances of two key real estate segments in our nation's largest market can be seen as a kind of microcosm of what's happening nationally as the coronavirus pandemic not only wears on but gains new steam.
On one hand, closings on apartment sales in Manhattan soared in the second quarter, published reports say, while at the same time, office vacancies also hit record highs.
Scorching apartment resales pace, including four for $213.6 million -- in one building
There were 3,944 apartment closings in the second quarter, up 38% from the first quarter and more than double the sales year over year, according to luxury digs specialist Brown Harris Stevens. The firm's CEO, Bess Freedman, says resale apartments for more than $5 million have done particularly well, with closings at that level up 85% in a quarter and also more than twice that of 2Q20, according to GlobeSt.com.
She told the news site that one address alone -- 220 Central Park South -- saw four resale closings in 2Q20 that averaged $53.4 million. Those kind of eye-popping prices drove the average to the second-highest ever, after 2Q19 when pending mansion and transfer tax increases pumped up prices, Brown Harris Stevens said.
Freedman did tell GlobeSt.com that such large-dollar purchases drove up the average price and that it shouldn't be assumed that prices for all apartments are rising at the same rate.
That said, "The most important message I can share with you is that Manhattan and New York City are back big time," Freedman said in her firm's Second Quarter 2021 Residential Market Report. "We've never been as busy as during the past few months, and that momentum is getting a boost at just the right time. Governor Cuomo's removal of most COVID-19 restrictions is the best news not just for our market, but for the city's economy."
Office space hits a record high as workers trickle back
Meanwhile, nearly 19% of all office spaces have no tenants, The New York Times says in a July 1 piece [subscription required], calling that "the highest on record as companies shed leases and embrace remote work."
The article cites data from real estate services company Newmark that says 18.7% of all office space is available for lease, more than twice as much as before the pandemic and up 15% from the end of 2020.
That's despite a recent survey from the Partnership for New York City that 62% of office employees are expected to return by the end of September 2021, up sharply from 45% predicted in a March estimate. (SL Green, a real estate investment trust (REIT) that is Manhattan's largest office landlord, shares that optimism.)
Before the pandemic, 1.6 million people commuted to work in the city every day, supporting not just office space but retail and restaurants, two other industries still very much in recovery mode. "No other city in the United States must confront the changing workplace more so than New York," the Times piece says, adding, "The pandemic has also placed enormous pressure on the commercial real estate sector, a pillar of the New York economy, as landlords rush to redesign offices and dangle incentives like lower rent to retain and attract companies."
The Millionacres bottom line
These two reports are about New York City, which is its own special kind of place, of course. For instance, at those price levels for apartments, it hardly seems likely that these were all people buying places that can better accommodate working from home.
But it does reflect the experience that, to varying degrees, many markets in the country are still experiencing, especially the big gateway cities. That's while other places like Austin, Texas, are seeing unprecedented growth.
While the delta variant threatens to create pandemic 2.0 across the country, savvy investors will continue to base their strategies on the truism that real estate, indeed, is local.