New York City Real Estate Faltered in 2020: Will It Rebound?
When the coronavirus pandemic first hit the US, New York City was declared an epicenter. This led to a mass exodus of tenants who quickly gave up their tiny apartments in favor of larger suburban homes.
In fact, 2020 was a terrible year for residential and commercial property owners in New York City. Sluggish retail sales, low tourism, and remote working led to a widespread attack on commercial property investors. And now, as a new year progresses, many are wondering how long it will be for the city to recover.
Without a crystal ball, there is no clear answer. But it’s fair to say it could be years before the New York real estate market makes a comeback.
There is an abundance of vacant homes
New York City landlords grew more desperate over the past year as apartment vacancies increased. In fact, many had no choice but to offer months of free rent to get tenants into leases.
In December, the median rental price for an apartment in Manhattan was $ 2,800 per month, down 17.3% year over year. While leasing activities increased towards the end of 2020, the vacancy rate was 5.5%, the third highest in history. In addition, many insiders believe that the vacancy rate does not accurately represent the actual number of uninhabited homes when considering properties that are purposely kept out of the market to prevent prices from falling any further.
But it’s not just residential buildings that are struggling with vacancies. Manhattan now has the most available office space since 2003, and the availability rate rose to 13.5% in November. Meanwhile, commercial real estate sales in New York City were down nearly 50% through October, and that number could rise in the coming months due to a lack of demand.
What does New York City need to recover?
It is clearly a bad time owning a property in New York City – although it can be a good time to buy a property as there is the potential for huge discounts. But that doesn’t mean that New York City is doomed forever. Rather, investors have to sit tight and be patient as the city slowly but surely emerges from its slump.
In order for New York City to fully recover, a few important things must happen:
- Tourism needs to pick up again: the absence of tourists has plagued New York hotels, causing several prominent hotels to close. Once it is safe for tourists to explore the city again, they can start pumping money into restaurants, retailers, and other businesses.
- Office buildings need to be made safe and appealing again: many companies are keeping their employees out during the pandemic, and there are fears that many employers will keep a permanent facility from home after the crisis is over. However, once office gatherings become safer, many companies may choose to have employees return and employees suffering from home fatigue may be anxious to come forward. Once the coronavirus becomes less of a threat and office work becomes a mandate, more people may choose to return to the city to avoid long walks.
- Nightlife needs to return to its former glory: these days, Broadway is closed, sporting events take place without fans, and there are no concerts. The restaurants are now struggling with capacity restrictions. All in all, New York nightlife is a shadow of what it once was, but once it’s safe to reopen, rental apartment demand is likely to boom as ex-city residents try to get back to the amenities they missed to have.
The bottom line of Millionacres
The punchline? The real estate market in New York City may recover, but only after the pandemic has largely ended. The introduction of vaccines may well kickstart that process this year, but it may take some time before it is safe to open a concert hall for 10,000 people or cram 20,000 into a sports arena. As a result, the upswing in New York City won’t be immediate, but it will likely get there over time.