Manhattan Is Coming Back
Like we all have been anticipating, Manhattan is coming back and catching up with the rest of the world – Queens and Brooklyn already came back, sales activity picking up significantly, and the rental market is stabilizing after coming up from the bottom in 2020.
The Residential Sales market in Manhattan is recovering quickly since November last year. For Q1 2021, the average sales price went up almost 9% Year over Year (YOY) to $1.7MM, however, the average condo price still came in 7% lower than last quarter to $2.5MM, the overall average price per sqft went down 8.5% to around $1,412 YOY, this is Manhattan Market-wide includes the Resale Condos and New Development Condos.
The overall pricing discount market-wide is less than 5% for the 1st quarter, it is also reported by several real estate attorneys that the recent deals were at full asking without any discount. Some of the new development projects are offering discounts due to the pressure by lenders etc., however, most of the deals are at minimal or no discount, especially for the $3-5MM market.
What are the driving forces? Affordability, the mortgage rate is at the lowest point historically, the crazy stock market profited the potential buyers and pumped more cash into their down payment, on top of that, most of the listings are flexible in terms of pricing. Plus the positive overall economic outlook and the mass vaccinations… We are predicting the market will be fully recovered by the end of this year if everything moves as expected.
Historically, now is the time to buy and the market will remain very active for the next several years, remember what happened in 2015? Very likely the history will repeat itself.
The Rental Market in the city showed tremendous leasing activities, however, overall the rent price is still down, overall around 15% down (March/April comparing with 03/20) from the worst period at 25% several months ago in 2020. The market is slowly approaching stabilization. The office workers are going back to the office and the overall recovery of the city will put upward pressure on the pricing and increase the absorption rate.
Despite the narratives that were put out by various media outlets that there was a massive exodus from Manhattan, it is overly exaggerated. More and more New Yorkers went to take a vacation elsewhere during the pandemic and later on realized they couldn’t fit into the community they moved to and miss everything about Manhattan, so most of them are planning on coming back to the city, plus multiple employers are calling them back to the office for the Summer or so.
For Commercial office/Ground floor retail sections – there are too many variables and still very hard to predict what will happen next. The bottom line is that people still don’t feel 100% safe, but most people are feeling better every day and become more optimistic. Most of the office buildings in the city are still 80-90% vacant. 5% of the employees are working from home before the pandemic, now 15% or more, maybe 50% or more will be hybrid for the remaining of the year. Zoom is a norm now, but should and will not replace physical interactions, so coming back to the office is only a matter of time.
Another interesting demographic shift is noted that more younger businesses are coming into the city and start looking at class-A retail spaces that they couldn’t afford pre-Covid, so we will see a shift in this sector and the city will be benefited from this shift.
Unfortunately, Landlords are being still destroyed, this will continue for a while.
increase the velocity of absorption.