There was a time when finding an apartment in Manhattan was no easy feat. But that's not the case today. The number of available Manhattan apartments has reached unprecedented highs, and with vacancy rates soaring, landlords are finding themselves in a very unusual and uncomfortable position. It's not surprising, then, that they're going out of their way to entice renters -- even if it means taking their own financial hit in the process.
Will free rent prevent a vacancy crisis in Manhattan?
Last August, the vacancy rate in Manhattan was under 2%. As of this past August, it was over 5%. All told, over 15,000 Manhattan units remain unoccupied, and landlords are growing increasingly desperate -- so much so that they've begun offering free rent through the end of 2020.
Of course, offering tenant perks is a long-established practice in a city like Manhattan, especially during periods of waning rental demand. In the past, landlords have offered free gym memberships or to pay tenants' broker fees on their behalf to fill empty units. But now, landlords are going to a whole new extreme in an attempt to increase their cash flow.
Why are there so many Manhattan vacancies?
Normally, renters flock to Manhattan so they can be close to restaurants and nightlife, enjoy the convenience of public transportation, and cut down on their commute times by living close to work. But the coronavirus pandemic has changed all of that. Nowadays, Broadway is shut down, restaurants can only serve customers in limited capacity, the prospect of boarding the subway is scary, and the appeal of office proximity no longer stands, what with so many people doing their jobs remotely for the foreseeable future.
It's for these reasons that there's already been a mass exodus from Manhattan into the nearby suburbs. Throw in a frighteningly high unemployment rate, and it's not shocking that one of the most expensive cities in the country, if not the world, is having trouble attracting tenants to pay exorbitant prices for apartments that have classically been likened to the size of a shoebox.
Of course, once the pandemic ends, nightlife opens back up, and companies start calling workers back to the office once again, there's a good chance we'll see a surge in demand for Manhattan apartments. But that moment may be at least a year away, if not farther, and landlords still have their own mortgages to pay. As such, they're going to extreme measures to save their businesses and ensure that they don't fall behind on their financial obligations.
Will offering up months of free rent do the trick? It might. Not having to pay rent for multiple months is an unquestionably tempting offer for tenants, and while many people are abandoning Manhattan these days, city folks at heart may be doing everything in their power to stay put and ride out the storm.
It's too soon to know how well landlords who offer up free rent will fare financially. Will the near-term hit they face be worth the promise of steady income for what could be the bulk of 2021? Possibly. But one thing's clear: They probably have no choice but to try.