1. Rental activity in New York City increased over the summer resulting in lower inventory and higher rents.
2. After dropping 19% from March 2020, Manhattan rent is now on the rise as high net worth renters return to the city for the fall.
3. Brooklyn’s rent first went up when residents moved from Manhattan, but fell when New Yorkers left the city.
About this report
The New York City rental market has been the subject of fascination since the start of the COVID-19 pandemic in March 2020. As one of the first US cities affected by the coronavirus, the Big Apple has quickly gained the attention of the pandemic due to the disturbing images of empty business districts and overwhelmed hospitals due to the upsurge in coronavirus cases. The subsequent exodus of residents seeking to avoid the lockdowns prompted numerous think-tank articles in the media to proclaim the New York City appeal an end.
Of course, the city is now flourishing. While the Delta variant has caused a resurgence of COVID cases in New York City, daily cases appear to have leveled off and the city’s fall events calendar is once again filled with concerts, comedies and musicals. This attracted many who left during the pandemic, as rental skyrocketed in all five boroughs over the summer.
The migration to the city brought the rent down to its pre-pandemic level, and even pushed the median rent for a bedroom in New York City above that in San Francisco for the first time since we started. follow the data in 2014. What motivates the return of New York? Let’s break it down.
How New York’s Rent Evolved During The Pandemic
After the start of the pandemic, rents plummeted as people left and vacant apartments piled up. In response, landlords have offered preferred offers to tenants in hopes of filling vacancies in the summer of 2020, with some offering up to three months’ rent free. In January 2021, the median rent for a bedroom was down 17.6% from March 2020, a dizzying drop in such a short time in a sadly expensive rental market.
Many housing pandemic trends are not really new trends, but rather accelerations of pre-existing trends. For example, a young family planning to leave New York City when their children have reached a certain age may have decided to move during the pandemic. Many retirees who were planning to move to Florida in the next few years did so during the pandemic for the same reason.
At the same time, the types of things that bring people to town – back to school, an internship, a new job – have slowed down because universities have been forced into distance learning and offices have closed. Add the acceleration of population outflows to the cessation of population inflows, and you have a recipe for reducing the rent.
But after the vaccine rollout began in January 2021, people started to return as restaurants and other urban amenities became more accessible and safer. During that year, the median rent for a bedroom in New York City rose 19.6%. Rent in New York today is only down 1.4% from March 2020. The New York Times reported that people who got good deals last summer are now subject to dramatic rent increases if they wish to renew their leases.
Manhattan rent fluctuates wildly as wealthy residents retreat
Manhattan rents began to fall almost immediately after March 2020. While the predominant media narrative at the time was that people were “fleeing the cities for the suburbs,” a more informative way of looking at the exodus is through the prism of the class, not of town planning. Well-off households with the means to move around did so because they wanted to escape what was the epicenter of the pandemic at the time. Rents have plummeted in Manhattan, hitting a low in January when they were down 19.2% from March 2020, a dizzying drop in just eight months.
But the turnaround was even faster than the fall. In the first six months of 2021, the median one bedroom rent in Manhattan fell about 15% from March 2020, but in July it climbed to the point where it fell only 5%. Zumper’s August data shows Manhattan is now up 1.9% from March 2020. Overall, it took Manhattan two months to close a 15% deficit.
How did it happen? It’s reasonable to conclude that the same people who caused Manhattan’s downfall, wealthy households, are behind its comeback. With a busy fall events calendar that features Broadway musicals, the New York Philharmonic, and countless other cultural venues, it seems the rich have returned as quickly as they left. With the boom in rental business, Manhattan’s vacancy rate has plummeted.
Brooklyn faced a more winding path
As Manhattan rent fell, remained stable, and then returned to its current level, Brooklyn rent has been subjected to a different migration pattern than Manhattan. This resulted in his rent changing to a different model. After the pandemic, rents rose in Brooklyn during the summer of 2020, reaching 9% above March 2020 levels. That’s because a lot of people who left Manhattan during that time went to Brooklyn, not exclusively in the suburbs as the news suggests.
But a number of headwinds wiped out Brooklyn’s rent gains in October. While wealthy Manhattan households were able to leave the city right away, those with less means had to wait until their leases expired before leaving. As job losses piled up, Brooklynites left the city to move in with their families until they found new jobs, whether in New York or elsewhere. And as the pandemic continued, it gave people more time to decide whether they wanted to leave the city as well, especially young families planning to leave when their children reached a certain age. The pandemic simply accelerated this decision.
Brooklyn rents started to rise again in the spring of 2021 and are now up 2.3% from March 2020. Although the listing stock remains high in Brooklyn, it is declining rapidly as activity increases. rent.
Midtown office closure keeps rents low in Queens
According to data from Kaiser Systems, New York’s office occupancy rate is lower than that of all cities in the country except one, San Francisco. While that didn’t stop rents in some areas from rebounding until they were before the pandemic, that doesn’t mean this trend is universal in New York City. The best example is from Queens. The northwestern part of Queens, particularly Long Island City and Astoria, is popular with renters because it offers a short drive to downtown Manhattan, where there are many offices. But with offices mostly remaining closed, rent in Queens has been slower to rise than Manhattan and Brooklyn.
As Manhattan rent plunged after the pandemic, the median bedroom rent in Queens fell and didn’t hit its low until March 2021, when it was down 11.7% from March 2020. Although it rebounded in part, it is now down 7% from March. 2020 — it appears that office closures have prevented more robust rental growth. As in Brooklyn, the listing inventory remains high, but has seen substantial declines during the summer rental spike.
Queens also has more New Yorkers and native immigrants than Manhattan and Brooklyn, which means these people did not leave Queens to return to a hometown if they lost their jobs during the pandemic, exerting downward pressure on rents. They already live in their hometown. Most residents of Northwest Queens are transplant recipients from New York. Many left during the pandemic, but the added cushion of native New Yorkers likely prevented Queens from being so responsive to the same forces that caused Manhattan rates to plunge.
Why is New York bouncing back but not San Francisco?
When our August Rent Report showed that the median rent for a bedroom in New York City exceeded that in San Francisco, many media outlets highlighted San Francisco’s exposure to the widespread adoption of work-from-home policies. as the reason the rent has stayed low. While this is true, New York’s office occupancy rate is negligibly higher than San Francisco’s, so why hasn’t it stayed so low?
It is difficult to identify a reason, and it is probably a combination of several factors. It is always possible that the possible reopening of the offices will push up the rent of San Francisco. Most of the townspeople are transplant recipients, and when their job wasn’t tied to a place, they left and didn’t come back (yet). New York also has a disproportionate number of transplants, but enough of those transplants have remained or returned to the city to push the rent back to where it was before the pandemic.
Why New Yorkers have backed down despite the close offices is open to debate. It’s possible that the rent cuts in New York City provided a real price incentive to come back or relocate for the first time (work-from-home policies also allowed people to move into the city, not just leave. ). Rent in San Francisco is down 20% from March 2020, and it’s still only $ 10 less than the country’s most expensive median room rent. The price incentive was never really there because San Francisco was so expensive before the pandemic.
New York’s many universities may have also played a role, bringing students back to the city this summer, when rent returned to pre-pandemic levels. While there are a number of Bay Area universities, the largest are not located within the city limits of San Francisco, and students do not live within those limits. Part of the answer could be that more people just want to live in New York than in San Francisco, whether their jobs are based there or not.
It is also interesting to note that the two cities are also exemplary of regional trends. Rents in major cities on the east coast have either returned to where they were before the pandemic or are on track to do so. But on the west coast, cities have seen their rents rise much more slowly, if at all.