When the coronavirus pandemic first broke, many Manhattan residents opted to flee the city out of fear. But that mass exodus was far from short-lived.
Once it became evident that the pandemic was not going away quickly and remote work would remain the norm for months on end, many Manhattan apartment dwellers packed up their belongings and moved elsewhere in search of extra square footage and lower rent. After all, why pay a premium to live near work and nightlife when office buildings are off-limits, Broadway is dark, and dining at restaurants is largely off the table? (Remember, indoor dining was banned in Manhattan for many months during the pandemic.)
But now, things are starting to change. Companies are starting to make plans to bring workers back to the office. Restaurants are open at limited capacity again, and even larger sporting arenas are beginning to welcome back spectators. As such, there's more interest in renting apartments in Manhattan.
But a big reason for that boils down to low rents. Manhattan landlords have gotten so desperate that they're willing to sign leases at bargain prices. But that's a strategy that could backfire on them.
Low lease prices benefit renters but hurt investors
From a renter's perspective, now's a great time to be in the market for a Manhattan apartment. The reason? Inventory is very high, and landlords are itching for revenue.
As of late March, there were 19,633 empty Manhattan units seeking tenants, according to Miller Samuel and Douglas Elliman, and nearly 24,000 units available at the end of February. All told, the vacancy rate in Manhattan was 11.25% in March -- an unsettlingly high number that's driven landlords to offer up heavy discounts.
In March, the median rent for Manhattan apartments, after factoring in landlord concessions, was $2,975. That's 14% less than median rents the previous March, when there were far fewer open units on the market.
Now on one hand, offering discounted rent or other concessions, like free rent, is a strategy that makes sense for Manhattan landlords right now. After all, it's better to get some money coming in than have a unit continue to sit vacant.
On the other hand, some landlords have specifically held off on listing their apartments so as to not broadly drive down rental prices. The logic there is that demand is apt to open up as things improve on the pandemic front, but if there are too many underpriced units on the market, those that are priced higher won't rent.
Why waiting to list makes sense
Right now, Manhattan landlords with vacant apartments may be better served sitting tight and waiting a couple more months before listing their units. As Manhattan continues to open up and in-person work begins to become a requirement, not a suggestion, demand for office-adjacent apartments is apt to increase. Plus, more people may be naturally lured back to the city once vaccines are more widespread and coronavirus numbers decline, even if they do have the option to continue working remotely.
As such, landlords who wait out this in-between period could put themselves in a better position to command higher rent in just a few months' time. Of course, those desperate for income may not be able to hold out, but those with fewer cash flow constraints may be better served keeping their vacant apartments off the market until the time comes to lock in tenants at a much higher price point.