What will New York real estate look like next year?
Rent, sale prices may drop, but not for those in need
One in five New York City tenants did not pay rent in September, by one estimate, and there is growing concern of “an eviction tsunami.”
As apartment vacancies climb, sale prices and rents are falling, but nowhere near the magnitude needed to compensate for scarce affordable housing options.
And while the flight of affluent residents to the suburbs appears to be overstated, major companies are downsizing and fewer people are commuting, setting the stage for a new reckoning over personal and business priorities.
Real estate is everyone’s business in New York City. The industry generated nearly $32 billion in taxes last year, 53 percent of the city’s tax revenue, and it employed more than 275,000 people, according to the Real Estate Board of New York and labor statistics. An inveterate source of obsession, envy and frustration, real estate colors the aspirations and agendas of countless people, companies and policymakers.
So how the industry weathers an unparalleled economic collapse fueled by a global pandemic will reshape not just the chronically underfunded public housing system and the overbuilt luxury condominium market, but also virtually every aspect of urban life.
To assess what might happen in the next year or two, The New York Times interviewed nearly 50 people, including former senior city officials, real estate executives, affordable housing advocates, urban planners and brokers.
When will the real estate market recover, and what will it look like in terms of supply, demand, and prices?
Will New Yorkers be more open to development in their neighborhoods, or will they be even more resistant?
How will housing, transportation, retail and commercial real estate be affected in the broader New York region?
The outlook is daunting. Unemployment in New York City is still 14 percent, after hitting 20 percent in June and July.
Residential real estate sales plummeted 40 percent in July, and 57 percent in August, compared with 2019, according to the New York City Comptroller’s Office. Commercial sales were down 28 percent and 43 percent in July and August, compared with last year.
Still, many experts predict that New York will eventually bounce back — as it always does, citing the eventual rebounds after the Great Recession, 9/11 and the fiscal crisis of the 1970s.
What Will Happen to the Market?
Rents and sale prices will continue to drop in the next year, significantly so in some areas, but likely not for the people who need relief most.
Rents in the New York metro area — including parts of New Jersey and White Plains — are projected to drop 7.7 percent to
11.3 percent by the middle of next year, from the first quarter of 2020, according to Andrew Rybczynski, a managing consultant with Costar Advisory Services, a commercial real estate data provider.
After the 2008 recession, rents fell nearly 10 percent in Manhattan because of high unemployment and rising vacancies, said Nancy Wu, an economist with listing website Streeteasy.
The median rental price in Manhattan, including concessions, was $3,036 a month in September, according to brokerage Douglas Elliman. That is an 11 percent drop from the same period a year ago, but still far beyond the means of most New Yorkers.
Rents will continue to drop citywide, in the absence of a vaccine, Wu said, but that trend masks affordability problems in several neighborhoods hit hard by the coronavirus.
In an analysis of neighborhoods with the lowest rates of infection — affluent neighborhoods like Battery Park City and Soho in Manhattan — rents dropped 1.9 percent from February to July, largely because of rising vacancies. In the hardest hit neighborhoods — including East Elmhurst in Queens and Fordham in the Bronx — rents have actually increased 0.3 percent in the same period, and a disproportionate share of Black and Hispanic renters, many in the service industries, have shouldered that burden.