New York City real estate is a finicky game: Apartment-hunting New Yorkers have been scoring deals left and right, but some landlords are trying to beat the discounts by holding empty apartments until prices rebound.
They’ve been yanking empty apartments off the market while demand and rent are low, a practice known as “warehousing,” The Wall Street Journal’s Will Parker reported. While warehousing is a typical approach when demand is down, Parker wrote, it’s reached new heights amid the work-from-home economy and stronger tenant eviction protections.
Parker cited data from real-estate analytics company UrbanDigs: During peak warehousing in August, landlords pulled 5,563 unrented apartments off the market. That dropped to 1,814 unrented apartments off the market in February, but the latter number was still triple the amount of apartments taken off the market in February 2020.
Landlords are likely holding these units in hopes of higher rental prices come spring and summer as the vaccine rollout continues, John Walkup, cofounder of UrbanDigs, told Parker, preventing more New Yorkers from locking in long-term deals.
New Yorkers are scoring deals on rent drops and concessions
“The pressures COVID placed on the marketplace created a unique opportunity to secure leases in prime locations and great buildings for significant discounts,” agent Ryan Kaplan, of Douglas Elliman, previously told Insider.
Rents in Manhattan, Brooklyn, and Queens all had the largest year-over-year declines on record over the last year, dropping a whopping 15.5% in Manhattan and 8.6% in both Brooklyn and Queens, per StreetEasy’s January Rental Report. The median asking rent in Manhattan was $2,750 – the lowest it’s been since March 2010, when rents dropped during the Great Recession.
Some buildings are even offering concessions of two to three months free on leases, which lowers a tenant’s net rent and can allow them to rent out a nicer building with more amenities.
Chris Schmidt, senior vice president of Related Companies, which owns luxurious rentals at buildings including The Strathmore on the Upper East Side and One Hudson Yards, where one-bedrooms can go for as much as $7,453 a month, told Insider in February that Related’s rents were trending down about 15% to 25% depending on the unit type.
Millennials in particular have been taking advantage of falling rents and discounts, upgrading to luxury apartments that suddenly fit within their budget in pursuit of more amenities, space, and the solo life.
But how long these deals will last depends on when the city fully reopens, Schmidt said, and he anticipates more real-estate momentum as vaccinations continue. “That’s going to force a lot of people seeing these steeper discounts to make a quicker decision,” he said, adding that as soon as there’s a better indication of when the workforce will return to offices, rents will start to go back up to pre-pandemic levels.
“Rent will continue to be lower than they were a year ago for the full year,” she said. “Even with the vaccine coming, it’s not going to magically make the huge glut of inventory go away. Prices will continue to fall until the inventory settles a bit, more people come back to the city, more jobs are recreated from the loss of small businesses, and the city returns, somewhat, back to where it was before the pandemic started.”
Over the past several months, Brett Vergara had been watching rent fall like dominoes for apartments at The Brooklyner, a residential skyscraper that briefly had the title of Brooklyn’s tallest building around a decade ago.
Replete with a rooftop deck, floor-to-ceiling views of The Empire State Building, and an in-building fitness center, The Brooklyner was a far cry from the Park Slope basement he lived in when he first moved to New York, where bars blocked the view out of his lone window.
“I was playing chicken with the fallen rent prices,” Vergara told Insider.
Vergara, a 28-year-old who works as a UX program manager, said he shared his last Brooklyn apartment with three roommates, with his share of rent coming to $825 a month. He had been flirting with the idea of solo living for the past two years.
“Part of me was torn between riding out really low rent for as long as I could and trying to figure out when was the right time to make the jump,” Vergara said.
The pandemic just so happened to be that time.
When a corner one-bedroom, which he said was priced around $4,000 when last listed in October 2019, hit $2,650 in February, Vergara said he decided to “strike while the iron was hot” and signed a lease for 66% off its pre-pandemic price.
In a city notorious for its unaffordability, the pandemic era has sent once sky-high rents plummeting, making luxury living by New York City standards attainable for those once priced out of such a lifestyle. Millennial New Yorkers like Vergara are jumping on deals they know won’t last indefinitely, upgrading to luxury apartments that suddenly fit with their budgets.
Rents have plunged amid a surplus of supply
When the city that never sleeps finally got some shut-eye, many wrote off the slumber as a city dying and traded in fast-racing taxis and towering apartments for sedans and picket fences. But for some of the young urban professionals who stayed, it was the beginning of a whole new life.
“The pressures COVID placed on the marketplace created a unique opportunity to secure leases in prime locations and great buildings for significant discounts,” agent Ryan Kaplan, of Douglas Elliman, told Insider. New Yorkers fleeing for the suburbs sent rental vacancies climbing, prompting landlords to lower rents in an attempt to attract new residents and propel revenue.
Rents in Manhattan, Brooklyn and Queens all had the largest year-over-year declines on record, dropping a whopping 15.5% in Manhattan and 8.6% in both Brooklyn and Queens, per StreetEasy’s January Rental Report. The median asking rent in Manhattan was $2,750 – the lowest it’s been since March 2010, when rents dropped during The Great Recession. Insider’s Libertina Brandt reported that rents are likely to continue falling throughout 2021.
While “luxury” can mean many things to different people, StreetEasy defines it as the top 20% of the market. Luxury rental prices dropped the most in Manhattan, falling by 11.9% to $5,642 from the second quarter of 2019 to the fourth quarter of 2020, according to data StreetEasy provided Insider. Prices fell by 9.7% to $2,935 in Queens during the same period and 7.5% to $3,937 in Brooklyn.
In NYC, a golden standard of climbing up the apartment ladder is snagging an apartment in a doorman building. In January 2020, the average rent for Manhattan one-bedrooms in doorman buildings were $4,514, data from real estate agency MNS revealed. By January 2021, they had dropped to $3,718.
Iliana Acevedo, senior vice president of new development at MNS, told Insider that they’ve been seeing millennials “not only upgrading to more amenitized buildings but also upgrading in unit size and neighborhoods that they were priced out of pre-COVID.”
Compass has done about 900 rental deals, the majority of which have been with millennials, since last March, Compass agent Ori Goldman told Insider. But he said he wouldn’t classify it as “millennials going luxury for the first time as much as just an extreme market drop, which means anyone who used to afford Manhattan can now afford the luxury.”
A building with amenities provides a much-needed community
On top, or sometimes instead of, lower rents, many luxury buildings are offering concessions of two or three months free.
Consider Vergara, who negotiated an 18-month lease with two-and-a-half months free, putting his net rent at $2,250 a month.
“Increased concessions and suppressed pricing allows somebody to rent out a nicer, more luxurious building, with more amenities and a better location,” said Joshua Young, vice president of market-rate operations at the Douglaston Companies. His firm owns luxury buildings The Ohm In Chelsea as well as Level BK and 1N4th on the Williamsburg waterfront, where rents range from $2,500 for a studio to $8,300 for a one-bedroom and amenities include an outdoor pool with skyline views of Manhattan.
Many of the experts Insider spoke with said the millennials who are upgrading covet amenities like an in-unit laundry, 24-hour doormen, pools, and gyms. Air quality is also high on the list.
“The younger demographic is looking for service,” Young told Insider. “It’s really about the whole amenity package.”
That’s something millennials may have traded previously for location in a walk-up building, said Chris Schmidt, senior vice president of Related Companies, which owns luxurious rentals at buildings including The Strathmore on the Upper East Side, which has its own squash court, and One Hudson Yards, which features a penthouse longe and bowling alley. At the latter, one bedrooms can go for as much as $7,453 a month. In February, he said, Related’s rents were trending down about 15% to 25% depending on the unit type.
Now, he said, a building filled with amenities provides a sense of community millennials feel has been missing in New York’s partially shut-down neighborhoods.
It’s what lured Vergara to The Brooklyner, but he said he hasn’t yet taken full advantage of the amenities because he’s staying cautious indoors, even with masked strangers, until he’s vaccinated. “It’s funny because those things aren’t even really revealing their hands yet,” he said.
Space: the most important amenity in a WFH economy
Both Kaplan and Schmidt said the search for an upgrade has seduced some millennial Brooklynites back to Manhattan, where they’re now finding the space and affordability they once left the island in pursuit of. Schmidt noted that Related’s buildings in Chelsea and Hudson Yards have been the most popular.
But Brooklyn isn’t losing its luster. Young said he’s seeing the trend the most in Douglaston’s two Williamsburg buildings, where there’s a feeling of more space by the water and nearby parks.
Last June, Juliana Goldman decided to prioritize her living space. She was living in a large railroad-style studio in lower Manhattan “with zero light and super thin walls,” she told Insider. It was time to hightail it to Brooklyn, where she always envisioned herself for its community feel.
Her non-negotiables: an in-unit washer dryer and floor-to-ceiling windows with lots of natural light. “I’m a plant parent,” the 34-year-old founder of lifestyle and beauty public relations agency TGN explained.
She found it all at Level BK, Douglaston’s 41-story glass tower that shimmers over Williamsburg and the East River, complete with an outdoor space, steam room, and direct ferry service to Manhattan. At the time, apartment deals were just starting to come in, she said. While she declined to share monthly rent, she said she signed a two-year-lease with two months free.
Trading up to a larger one-bedroom and brighter space was a game-changer, Goldman said: “It’s really helped having extra space and being able to create that working from home environment where it doesn’t feel like I’m literally working out of my bedroom.”
Space has always been a rare commodity in NYC, but the work-from-home economy has cast it in a whole new light.
Many millennials like Goldman have been seeking an office space or a large living room that can accommodate a work zone, broker Isaiah Dunn of Compass told Insider. Common outdoor space, like a sun deck, also tops the list.
“People want to be able to have friends over when they want and not feel confined when at home all hours of the day, compared to pre-COVID, when you could just meet friends at a local spot,” he added.
Goldman said her space has become an oasis, as she spends her downtime vintage furniture shopping and decorating. “The energy here is better,” she said. “I just wake up exponentially happier every day because of my living environment.”
Entry into adulthood
Some millennials are opting for two-bedrooms with a roommate to further cut the cost of luxury, and some millennial couples are upgrading from a one-bedroom to a two-bedroom for an office space.
But three experts noted a big push toward entry-level studios and one-bedrooms. Schmidt of Related said most millennials upgrading, like Vergara, are doing so to have their own apartment for the first time.
Take Lauren Mennen, a 31-year-old news writer, who was living on the Upper West Side with three roommates before the pandemic. “I’ve never actually lived alone,” she told Insider. “I took the dropping rent prices as an opportunity to start looking.”
In October, she found the studio of her “dreams” in a luxury doorman building in the Financial District with an “amazing view” of 1 World Trade Center, the Empire State Building, and the Hudson River. The building itself has a gym and a sun deck.
She was previously paying $1,500 a month for a four-bedroom flex unit (meaning the unit was originally two bedrooms with walls added later on to create four). Now she’s paying $1,700 – a big drop from the typical $2,800 monthly rent the place normally goes for.
Even millennials already living by themselves are getting upgrades. For some, it’s the first time they’ve had a wall between their bed and their couch.
Both Goldman and Ai Nguyen, a 30-year-old behavioral specialist, fall into that category. In February, Nguyen moved from a 300-square-foot studio on the north side of the Upper West Side to a 500-square-foot one-bedroom farther south in the neighborhood in a newly renovated 14-story doorman building called the Parc Coliseum.
It was the new hardwood floors, in-unit laundry, and price that sealed the deal for her.
She told Insider her rent increased from $1,730 to $2,043 for the bigger place, but she scored a deal with two months free. That puts her net rent at $1,700 – less than her studio. A StreetEasy listing of a one-bedroom of similar size in the same building came to $3,704 in September 2019.
A rebounding market
Developers and real estate agents alike agreed that winter, typically slow in NYC real estate, has been millennial primetime.
“We’ve seen a particular spike in absorption since Thanksgiving, and millennials are a large percentage of renters rushing back to the city looking to snag a good deal before the spring rush,” MNS’ Acevedo said.
But just how long millennials will be able to cash in on an upgraded NYC lifestyle remains to be seen.
Schmidt said it’ll be contingent upon when the city fully reopens, and he anticipates more real-estate momentum as vaccinations continue. “That’s going to force a lot of people seeing these steeper discounts to make a quicker decision,” he said, adding that as soon as there’s a better indication of when the workforce will return to offices, rents will start to go back up to pre-pandemic levels.
NYC is the only major US city that still saw price drops in the last month, according to Apartment List. But it’s slowing down – rent only declined 0.1% compared to the average 2.4% over the last nine months.
Young said he’s already seeing strength in the market, and has begun pulling back on offering “month-free” discounts last week. There’s also the cyclical nature of leases, he explained: Since many jumped on deals in the middle of winter, fewer people will be vacating at the end of March. Less supply gives buildings an opportunity to pull back on prices and incentives.
Some of those who nabbed a deal at what appears to be the bottom of the market said they’re also concerned about what their rent will look like after their lease is up. Nguyen, the Upper West Sider, said she’d likely stay if it only goes up by $200 a month. Any more than that, she said, and she’d be okay with leaving the city.
Regardless, they all said they feel extremely lucky to have been able to move during the pandemic. “There’s a sense of guilty gratitude,” Vergara said. “I feel like I got away with something.”