When the coronavirus outbreak began on U.S. soil, New York City had the dubious distinction of being flagged as its epicenter. And that didn't go over well with residents.
Since March, many Manhattanites have left the city in favor of more space and less stress. They've not only taken the surrounding suburbs by storm, but some have even fled all the way to the Hamptons in an effort to escape the madness.
The rise of remote work has made this mass exodus possible. With employees no longer being bound to office-building proximity, Manhattan residents have had a fairly easy time severing ties with the city, especially given its exorbitant rent. And at a time when nightlife's been nonexistent and Broadway has been dark, the lure of Manhattan just hasn't held up in a coronavirus world.
All of this has created an alarming vacancy crisis for residential landlords. Manhattan's vacancy rate has reached a record 6%. That rate normally sits around 2%.
But November saw an uptick in residential leases -- a 30% climb, to be specific, compared to a year prior, according to a report from Miller Samuel and Douglas Elliman. That marked the strongest November on record in 12 years, with more than 4,000 new leases signed.
But let's be clear -- the situation in Manhattan is still pretty dire, and it could take years for the city to recover from the effects of the pandemic.
Manhattan is still a hard sell
Renters are coming back to Manhattan for different reasons. Some of the aforementioned new lease activity comes as a result of current residents looking to upsize their living space. For others, the desire to return to the city stems from having sold their suburban homes at a whopping profit and wanting a place to crash temporarily while they figure out their next move. But while Manhattan lease activity may have jumped in November, the reason has to do with the fact that landlords are drastically lowering prices in an effort to attract tenants.
The median rent price for a Manhattan apartment is now $2,743 -- a figure that may seem high by national standards but for New York City is anything but. And in addition to lower rents, landlords are also being forced to offer concessions to draw in tenants, like one or more months of free rent.
Furthermore, while the official Manhattan vacancy rate may be 6%, the actual vacancy rate could be much higher -- closer to 18%, in fact, when we account for unlisted apartments. In an effort to avoid further depressing the local real estate market, some landlords are holding off on listing vacant units altogether and are instead quietly absorbing that financial hit.
Additionally, tenants are taking advantage of the fact that they have the upper hand by negotiating longer-term leases to lock in today's competitive rental rates. And while that income security may be good for landlords on one hand, at today's price points, it's less of a great deal for them.
Therefore, while news of an uptick in Manhattan apartment leases may seem like a positive development at first glance, the reality is that the city is still very much in the throes of a crisis. The good news is that health experts are working on deploying a coronavirus vaccine that could turn things around on the pandemic front and help restore New York City to its former glory. But that revival may be a ways off, and until the idea of living in Manhattan starts to hold more appeal, landlords will continue to face a revenue crunch.