When the coronavirus outbreak first hit U.S. soil, New York City was identified as its early epicenter. Not shockingly, many residents chose to flee the city in search of larger living spaces -- an option that was especially feasible in an age of remote work.
During the pandemic, residential vacancy rates rose in New York City, leading desperate landlords to go to extremes in an effort to sign leases. That included offering massive discounts and concessions to attract tenants.
But now, New York City's residential real estate market seems to be heading for a rebound. And that's great news for real estate investors in the city.
Rent prices and leasing activity are climbing
In May, the median rent in Manhattan, including concessions, was $3,037 a month, up 8.8% from April, according to Douglas Elliman. That's the largest monthly increase in almost 10 years.
Of course, even with that increase, that $3,037 a month represents a 11.1% drop in median rent compared to a year earlier. But still, a month over month increase is a sign that the residential real estate market may be moving in the right direction.
Leasing activity also picked up in May, with 9,491 leases signed. That represents the largest number of monthly signings since 2008.
And it's not just Manhattan where rents and leasing activity are picking up. In May, the median rent in Brooklyn, not including concessions, was $2,499, up from $2,400 in April. Meanwhile, in Queens, the median rent reached $2,100, up from $2,050 in April.
The investor takeaway
Even though rent prices and leasing activity seem to be trending in the right direction, New York City's real estate market isn't likely to recover overnight. But the fact of the matter is that rents may have, in fact, bottomed out, leaving them to only go up from where they are today.
In fact, as things get back to normal and the number of available apartments dwindles, the demand for rentals is apt to increase, which should, in turn, put landlords in a stronger negotiating position. In Manhattan, there were 19,025 apartments available for rent in May. That's down from 26.5% in January.
Now that New York City has reopened in full, people who fled for the suburbs may begin to come crawling back, eager to swap the sound of nighttime crickets for honking taxis and crowds. And as more companies put an end to their remote-work arrangements and call employees back to the office, more people are likely to rush back to the city to avoid a horrendous commute.
All told, New York City leasing activity is very likely to pick up in the coming months. And that means landlords may soon have the option to not only charge higher rents, but also put an end to concessions, like discounted rent, that hurt their bottom line. And while it may be some time until the city experiences a full-fledged recovery, there's reason for investors to be positive at this stage of the game.