It has been a rollercoaster of a year. Whew! Let’s take a look at what happened to the Manhattan real estate market and the outlook for 2021.
During the first COVID-19 lockdown starting mid-March, real estate showings were prohibited and consequently transaction volume plummeted. Nobody buys apartments without actually viewing them (with very very few exceptions). Prices dropped. But not by as much as was feared.
When the market reopened in mid-June, there was a quiet period (exacerbated by the upcoming presidential election) then transaction volume came roaring back.
Active supply reached its peak of 9,600 in October. A level not seen in the last 10 years. Active supply has since declined to 8,377 as a result of contracts signed and apartments taken off market. Supply is expected to continue to decline with the winding down of 2020 and then re-bound in the new year.
https://www.youtube.com/watch?v=Fi3D8bgve1g
https://www.urbandigs.com/dashboard/
Pending Sales
Pending sales usually reaches its peak at Thanksgiving during normal years. However, contract signing has remained strong with over 200 contracts signed the week ending December 11th. Buyers are out and transacting.
Weekly Contracts Signed
With no less than three Covid-19 vaccines about to hit the market, and more behind, people are looking at the light at the end of the tunnel.
Here is the scenario that has buyers active in the market right now:
- Lower prices creating price opportunity
- Historically low record-breaking mortgage rates
- Covid vaccine on the short-term horizon
- Aggressive tech giants signing huge multi-year leases during Covid providing a counterpoint to the finance firms that are leaving the city
As the Midtown office towers start to fill up again and the city comes back to life, it seems clear that residential real estate will be in rebound mode.
Trends to Watch in 2021
As we wrap up an interesting 2020 for real estate, here are the trends worth looking at:
- Rental lease signings are up huge (30%) as renters return from the suburbs for massive rent discounts. Leases were signed at the fastest pace in 12 years in the month of November.
Rental Rewind
Manhattan apartment rents have tumbled to the lowest in a decade:
2. Even with the various vaccines on the near-term horizon, it doesn’t appear that Midtown office towers will be filling up any time soon.
Home Office
For those who are working from home by choice, personal preference and concerns about coronavirus are the major reasons why:
3. The reluctance of white-collar workers to return to the office coupled with a complete crash in tourism dollar volumes has been a disaster for retail stores and restaurants. With indoor dining banned as of December 14th in New York City, more restaurants will fail.
This has caused retail rents to drop around 13% in major retail corridors in the city. The New York Times carried an article suggesting (rightfully so) that some office space (up to a million square feet) ought to be converted to residential.
https://www.cbre.us/research-and-reports/Manhattan-Retail-MarketView-Q3-2020
https://www.nytimes.com/2020/12/11/nyregion/nyc-commercial-real-estate.htm
4. The macro story to watch is the retail rental prices, which will have to drop significantly to start clearing the market. As they do, expect the streetscape to become much more vibrant as boutique shops, mom-and-pop stores, local entrepreneurs and business owners can once again afford to do business here. This will be the beginning of another era of a great New York City, one that can once again be home to shops and businesses that are not just pharmacies, banks, and national retail chains.
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