According to cellphone data 420,000 people physically left New York City between March 1 and May 1 when the coronavirus upended our way of life. Largely it was the streets of the wealthier enclaves ranging from the Upper East Side to Brooklyn Heights that went quiet with a mix of residents venturing out of town to the like of Long Island. Upstate New York. Connecticut. South Florida, and New Jersey. The types of moves were mixed: More established residents sought earlier-than-normal-Memorial-Day refuge in second homes or rentals ordinarily reserved for weekend getaways. Then there were many stories of twenty and thirty-somethings moving back into their childhood bedrooms - often where home offices or gyms were set up in their long absence. With coronavirus under control in NYC for now the question on everyone's mind is: "How many return?”
Some trends are becoming apparent. More seasoned millennials who already had a timeline to leave New York for the suburbs are leaving earlier. If the plan was to buy a house within two years, they’re exploring it now while it appears some work will be remote into 2021. This is leading to a surge in demand in the suburban enclaves of Long Island, New Jersey, and Connecticut with prices in the Hamptons recently reaching all-time highs.
For those less established in New York City –members of the ‘Gen Z’ sect who may have transplanted from other areas around the country come to mind – many are departing New York altogether for their parents’ houses or for ‘secondary’ cities that are more affordable. With that there is a surge of rental vacancy which is lowering pricing and making New York cheaper for locals and new arrivals. Vacancy rates have more than doubled year over year from 1.61 percent in 2019 to 3.67 percent in 2020 so it’s an opportune time to negotiate for lower rent if heading into a lease renewal as a residential Tenant. Anecdotally on several residential leases I completed in DUMBO there were 15% declines from the rental rates signed just one year ago.
On the Upper East Side this summer I’m seeing pent up demand release onto the market especially for apartments priced under $2m. The buyer profile here is composed of members of the professional workforce – those in medical, legal, technology, and media – who intend to live in Manhattan long-term and are keen to swap out some funds from a bubbling equity market while securing mortgage rates that are at historical lows of ~3% for a 30 year fixed. Price discovery is still underway but there is a degree of continuity in this submarket relative to one year ago – I’m seeing discounts of 1-5% compared to their pre-covid levels. Opportunists in this price bracket expecting a monumental fall off in value have found themselves disappointed so far as federal stimulus and an abundance of technology and financial employment insulates many local buyers from job loss.
Then there’s the office market and the future of the ‘downtown’ experience in urban centers. Despite all the hoopla about working from home in perpetuity I’m certain there will still be office needs for established firms’ onboarding, collaboration, recruitment, and efficiency. I look to the recent lease signing of Facebook’s 730,000sf campus at the Farley Post Office redevelopment as a major vote of confidence in Manhattan and that the office isn’t going away anytime in the medium and long-term.
Some combination of safety precautions, therapeutics, vaccination, and herd immunity will eventually quell the virus in its entirety or simply help reduce health risk. New York City already stands out when it comes to safety despite our density – a feature that apparently isn’t married to the spread of the virus as we’ve seen in other parts of the country. As that happens over the next year or so and the cultural institutions of New York reopen – Broadway, The Met, The Knicks, Lincoln Center – we’ll quickly be reminded of their relevance and why people from all over the world come here. So before running to increasingly competitive housing markets outside Olde New York I encourage current residents to explore the softer sales and rental markets first.