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NYC Real Estate

New York Real Estate Surging As City-Life Returns To Normalcy 

After one year of the Covid-19 pandemic, thanks to the rollout of multiple vaccines, life in major cities is starting to return to normalcy, as are the many industries that keep these cities populated. Real estate in New York City is beginning to see a rise in demand as prices begin to decrease again. 

In Manhattan, Brooklyn, and Queens the number of leases that were signed in February of this year beat a record that was set back in 2012 during the comeback from the 2008 economic crisis. “The median rental price—lease value net of concessions—fell at least 11% across those boroughs last month,” according to a new report by Douglas Elliman Real Estate.

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Hundreds of thousands of New yorkers initially fled from the city to head to suburbia when the pandemic began. Within the past few months, however, there’s been an increase in transactions within the cities major boroughs. The coming months are projected to give the city the boost it needs to recover from the economic impact of the pandemic. 

Some owners are keeping their properties off the market to wait for more individuals to be vaccinated/ the summer when it’s expected that more individuals will be flocking to the city.  According to UrbanDigs, a real estate insights firm, “in Manhattan landlords took more than 1,800 apartments off the market in February. For their part, renters are enjoying the reprieve from record prices, which peaked just before the pandemic.

According to Douglas Elliman, in Manhattan specifically non-luxury units will be offering the best deals in the coming months, and apartments of three or more bedrooms will likely be the most discounted due to the influx in demand. “The median rental price dropped 22.7% over the last 12 months on those units. Two-bedroom apartments are down 8.9%, while studios are down 19.3%. New signings are up dramatically from February 2020, but the overall vacancy rate remains high, at 5%, compared to 2.01% last year.  More than 40% of new leases come with some form of landlord concessions, the authors said, often one or more months of free rent during the first year after signing.”

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In Brooklyn, the borough saw the ““highest number of new lease signings since tracking began during the financial crisis, at 1,834 for February, a 133% year-over-year increase. Still, the median effective rent dropped 16.3%, more than any other year in almost a decade. Nearly 40% of new signings last month included landlord concessions,” according to reports from Miller Samuel Real Estate Appraisers & Consultants.  

Miller Samuel also revealed that studio apartments in Brooklyn are seeing the best discounts in the borough. Average rental prices for studio’s fell nearly 19% when compared to this time last year. Apartments with three or more bedrooms saw the next biggest discount with a 13% decline. There are currently 3,438 listings in Brooklyn, which is also up 1,375 when compared to the amount of listings the borough had this time last year. 

Queens also set a new record for pricing, with inventory up 64% and signings up 36% when compared to last year.

NYC Real Estate

New York City Luxury Real Estate Expected To Thrive In 2021

Based on New York City real estate’s last quarter of 2020, the luxury sector of the market is expecting to thrive in 2021. Sales of homes that cost more than $4 million increased slightly when compared to how they were selling this time in 2019; a surprising shift in the market considering we’re currently in the worst phase of the Covid-19 pandemic yet. 

Donna Olshan is the president of luxury real estate broker Olshan Realty who claims this increase is partially due to “a demand that was never met because we lost the most important real estate quarter to the pandemic – the spring. The upward tick also occurred because most of these sales are [to] New Yorkers, or from the New York metro area, betting on the home team. They are getting Covid-19 discounts, they’re looking at the long-term prospects of New York, and they’re buying.”

Jonathan Miller is the president and chief executive officer of Miller Samuel appraisers who thinks that NYC will see a major uptick in sales in 2021 because while many made the move to the suburbs during the pandemic, that craze will soon be over as the world begins to reopen. 

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“The way I think of the suburbs is that they had their moment. The ‘fleeing the city’ narrative is already extremely dated. While suburban sales are still up year over year, it’s just no longer a rocket ship of growth.” Miller also believes that this over-saturation of individuals in these suburbs are going to drive those markets way up, along with the prices of property. “And the jump in pricing, largely caused by what I would call panic buying—where people left the city out of fear—that was front end-loaded, and I don’t see a compelling reason why that [price growth] can be sustainable.”

Olshan believes that Brooklyn in general will stay as hot on the market as it has been; the pandemic hasn’t really impacted the real estate in the borough. “Luxury” real estate in Brooklyn is also much “cheaper” when compared to what’s considered luxury on the Upper East Side. Any home over $2 million in Brooklyn is considered luxury, which according to Miller is the main reason the area is so popular. 

“Brooklyn is certainly accelerating, and I don’t see any reason for that to stop I mean a million dollars buys you more space, and once you get into that luxury sector, that value grows quite a bit.”

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Foreign buyers investing in luxury New York City properties throughout the pandemic have certainly helped keep the industry, and economy, afloat, however, this has also caused the pricing to increase exponentially, and considering we’re in the middle of one of the worst economic disasters in US history, less American investors are likely to purchase these properties. 

In Manhattan this will especially be an issue considering how large the luxury condominium market is now in the borough, which Miller describes as being “burdened with a tremendous amount of supply.” 

“In 2020 we had 8.7 years of sellout, meaning it would take 8.7 years to sell all unsold Manhattan new-development condos. That is likely to drop to 7.2 years in 2021, because there’s an anticipated decline of new products coming into the market. Plus, additional sales will occur as buyers are drawn by discounted pricing. I think in 2021 we’ll see a continued drop in price trends.”

The next few months will be determined by how well the economy is able to recover with the new Covdi-19 economic relief packages, as well as how the country begins to recover with the rollout of two vaccines. 

NYC Real Estate

Manhattan Real Estate Stronger Than During The Great Recession

According to a recent analysis by real estate market data firm UrbanDigs, the Manhattan real estate market is currently in much better shape than it was during the Great Recession. Like most industrys adjusting to pandemic life, however, the future is still very unclear and fearsome. 

The report claimed that there were much more sellers than buyers during the Great Recession but now, during the Covid-19 pandemic, that gap is much smaller. Noah Rosenblatt and John Walkup are the cofounders of UrbanDigs, and recently claimed that they believe this gap has lessened because the Great Recession was a strictly economic crisis in America while the coronavirus has halted every single aspect of life for everyone, regardless of socioeconomic status. 

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“The lack of sharp spikes in supply and a corresponding drop in demand suggests the market is not as one-sided as the Great Recession, although lingering virus fears will keep a lid on demand for the time being.”

The report heavily focused on comparing the supply and pending sales of the past six months with the first six months of the recession as well. They also focused on what’s known as the “market pulse,” which essentially is the ratio of pending sales to actual supply. A lower ratio number would reflect that there are more sellers than buyers. 

In September 2007, supply increased by 10% every quarter and pending sales were dropping at a rate of 30%, according to past analysis’. The 15 quarters that followed showed a steady increase in supply, and a major drop in pending sales; 50%, dropping the market pulse from 1 to .16. When the pandemic initially shut everything down in March, there was a major drop in pending sales, which boosted supply, however, it was nowhere nearly as quickly as it dropped in 2007. 

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The market pulse is currently at a .22, which has been expected due to a general pulse decline within the past five years in Manhattan; in late 2019 the pulse was at .3. Rosenblatt and Walkup noted that sellers today in the metropolitan are still facing the heaviest competition in nearly a decade due to the increase in properties available, and willingness from sellers to negotiate their pricing. “Clearly, the economic impact of the pandemic has yet to be fully tallied, but in the meantime, it appears that the market for Manhattan real estate is functional, just fearful.”

Overall, however, the two believe that comparing the state of the market now to what it was during the Great Recession is like comparing “apples to oranges.” While there may be many general similarities the differences fully outweigh them. There have been spikes in the unemployment rates during both events, however it’s broken major records within the past six months because the job losses are more sudden and frequent. The two do believe, however, that whenever this pandemic does come to an end unemployment will hopefully bounce back quickly, and the supply and demand of the market will follow. 

“NYC real estate and the economy, in general, are weighing other exogenous forces so with that in mind, certainly, there is more room for real estate to go down, but in the long run, the city will renew itself, even if the process might be bumpy.”

Industry workers believe now would be a great time to invest and negotiate in real estate if you are lucky enough to have that ability right now. They also believe that Manhattan hasn’t seen the absolute worst that the pandemic can do in regards to negatively impacting the market and sales, so like the rest of the country and its many industries, they’re taking every precaution currently imaginable to stay afloat.

NYC Real Estate

Manhattan Real Estate Deals Fall By Nearly 60% As Suburban Market Thrives

Potential contracts for Manhattan apartments have fallen by more than half this past July while deals in more suburban environments have doubled, proving that many individuals are trying to escape the reality of a close knit metropolitan area in the middle of a global health crisis. 

Technically speaking, the number of signed contracts for apartments and condos in Manhattan has dropped by 57% in July when compared to the numbers one year ago. According to reports from Miller Samuel and Douglas Elliman, the higher end of the market is what’s being hit especially hard, as co-op properties that are priced between $4-$10 million are down over 75% when compared to 2019’s sale numbers. 

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While the number of actual signed listings is decreasing, the number of new apartment listings is continuing to increase. New listings in Manhattan jumped 8% when compared to last year, and the number of unsold apartments is at its highest level in nearly a decade. According to Samuel and Elliman, the market is currently in a position to have more than a 17-month supply of apartments to sell; the typical Manhattan average is an eight month supply.

Obviously the pandemic and lockdown procedures that come with it are impacting the industry. Metropolitan’s all over the world are being hit hard, but Manhattan is especially struggling, especially considering New York City was the initial epicenter for Covid-19 when it first began affecting individuals in America. 

The lockdown is preventing all apartment showings to be done in person, making it difficult to get deals signed. Additionally, many native New Yorkers are fleeing the city for more suburban options to ride out the rest of the pandemic. The numbers in July are a reflection of individuals who either know someone, or have additional properties in more suburban settings; like on Long Island or Westchester even. CEO of Miller Samuel, Jonathan Miller, spoke with the media about these trends and why the city is the last place people want to be right now. 

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“The city is less of an anchor now, it’s going to take longer for the city to recover than the suburbs. Anything within a two-hour radius of the city is as busy as it’s ever been, there’s just a fear of density right now.”

Sales contracts in the Hampton’s nearly doubled with July with 267 signed deals. In Westchester County, deals also doubled when compared to last year with 987 signed deals. However, experienced real estate brokers working in the city aren’t too worried about these numbers. While this is the worst international crisis they may have ever experienced, it’s not the first time the city’s real estate industry has had to recover after mass tragedy. 

Many use September 11th or the Great Recession as an example for the way in which the industry is able to recover along with its citizens. After both, deep discounts on properties in the city is what helped recover New York’s economy, and many are expecting the same results this time around especially among higher end properties.

NYC Real Estate

How NYC’s Real Estate Market Continues To Change

As one decade ends and another begins, the New York City real estate industry is taking all it’s learned within the past ten years and applying it to 2020. Throughout the past decade, there’s truly been a shift and growth within the cities real estate market. Brooklyn has become a hub for millennials and young families, Manhattan has gotten pricier as always, and Harlem is going brownstone. The east coast concrete jungle is forever changing with the times and as 2020 approaches, agencies are preparing to keep up with that change. 

One of the major changes that’s taken over the city within the past decade is how many more condos have been built. Unfortunately, this trend isn’t exactly succeeding, as according to Bisnow Magazine, Manhattan currently has more than 9,000 condominium sale units still empty. Real estate agencies are blaming the constant influx in real estate prices in Manhattan; no one can afford the borough. 

“Everyone has seen the reports of unsold apartments, about 30% of the apartments sold have come on as shadow rental inventory. I do think we will see some repricing in the condo space,” Michael Givner, A Morgan Stanley Executive Director, said.

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Givner went on to discuss how condo repricing has already begun, and ever since Labor Day the industry has seen an increase in buyers as a response to a decrease in asking price and inclusion of more incentives. Prices in the city are becoming more negotiable through corporate sponsorship; however, the results haven’t been as successful as expected. 

Many of the residential buildings in the city are built around the same time, that’s how overall neighborhoods change in an instant. So while the demand may be there, the supply can tend to overcompensate. In addition, agents are noticing an increase in office space rentals over residential renting in areas of Downtown and Midtown. While the leasing market may be thriving through this process, the fact that more residential families aren’t moving into these spaces that were constructed for their market specifically hurts the industry in the long run. 

When certain areas of the city begin to be known as areas of business, or office spaces, that branding serves a long term impact, and it becomes way less likely that the intended market for that area will actually fill the space. That’s what agents are seeing happen in the Mid/Downtown areas. 

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“One of the millennials in my office said that Midtown is where fun goes to die. 2020 will be an interesting year to observe how Midtown rebrands itself. How long will it take, who will it attract and how will it evolve over the next 10 years,” said Colliers International NY Tri-State President Michael Cohen.

It’s also been reported that the hotel market in New York City has remained fairly stagnant for the past few years. While “stagnant” may not mean “declining,” that doesn’t mean it’s a good thing either.  A flat real estate market means not enough profit is coming in either and when it comes to the city’s hotel industry that’s what’s seeming to happen. Because of overall rising room costs, in combination with an oversaturation of hotels in the city and increase in popularity in services such as Airbnb, the industry just isn’t thriving as it used to. 

“The important thing that we found, in hospitality, is managing expenses and keeping a lean staff providing what guests want when they come to New York City. The hotels we are building have a great room, a clean bathroom, not a lot of amenity space and not a lot of staff, and what we found is that’s a recipe for success.” said Hidrock Properties CEO Abie Hidary.

While aspects of New York City’s real estate market haven’t exactly kept up with all the development it’s seen, agencies are learning from the mistakes of the past decade. As stated above, the hospitality industry is mainly focusing on what’s working and delivering that to its clients. That’s the general consensus over how to handle any and all of the problems in the industry, especially in the city.

WeWork

How the Collapse of WeWork Could Impact NYC Real Estate

WeWork, a company responsible for leasing up to 1 million square feet of office space in cities around the world every day, has recently run into serious financial difficulties have raised concerns about the impact on New York City’s real estate market. In large part as a result of then-CEO Adam Neumann’s questionable and irresponsible antics, WeWork’s parent operation, the We Company, saw its valuation cut in half overnight right as the company was preparing to go public. As such, the We Company lost $1.3 billion in the first half of this year alone, which works out to a loss of $5,200 per customer. Several thousand layoffs at the company are planned, and the We Company’s more ambitious projects, such as the WeGrow academy, an entrepreneurial school, have been canceled

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WeWork happens to be the largest office tenant in New York City, as it owns over 100 locations in Manhattan, occupying 8.9 million square feet of office space. WeWork operates by maintaining office space and renting it out to professionals; however, in the aftermath of the company’s rapid decline, exactly what will happen to this tremendous amount of space WeWork is leasing is unclear. WeWork rose to prominence by offering flexible opportunities for urban professionals, and while the company is currently in decline with a low probability of recovery, the philosophy of flexibility in working environments is likely to stick around. 

That’s because, while the business itself is failing, the business model WeWork popularized has taken off both among rival companies that lease office space and landlords themselves. While it remains the most notable example, WeWork did not invent the industry it occupies, and there exist a plethora of companies that are primed to take WeWork’s place in providing so-called coworking spaces, many of which pre-date the founding of WeWork. And according to industry reports, demand for spaces of this sort remains strong, as consumers appreciate the sort of freedom that flexible office space provides. As such, when WeWork’s leases expire, there’s nothing stopping landlords from adopting their business model with the office space they own, increasing revenues for corporate landlords and potentially reducing costs for clients.

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As WeWork generally doesn’t run entire buildings, instead leasing a small percentage of them, the fallout from WeWork’s likely collapse is predicted to be relatively minor. In fact, landlords are already developing contingency plans for WeWork’s anticipated demise. That being said, not every company is abandoning WeWork, as they continue to generate new clients such as Rudin Management Company, which will soon open a six-story glass building in Brooklyn Navy Yard, with WeWork as its primary tenant. What’s more, large multinational corporations like Verizon and IBM have taken advantage of WeWork’s coworking spaces, as have Microsoft and Airbnb. That being said, these large companies would also likely be able to handle WeWork’s collapse, as they have the resources to maintain usage of office space currently leased to WeWork.

Though WeWork brands itself as a disruptive technology startup like Uber and Postmates, the reality is that WeWork is more like a glorified property-management company. Although the hype associated with WeWork’s tech-centered approach is responsible for much of its early success, technology turned out not to be a major factor in the company’s operation. While the future of WeWork as a whole remains uncertain but looks fairly dire, the future of coworking spaces is likely as bright as it’s ever been, as companies seek to take advantage of the flexibility such arrangements can provide.