There was a point when Manhattan apartments would get scooped up so quickly that prospective renters needed to show up with a security deposit in hand for a shot at signing a lease. Nowadays, it’s a very different story.
Much of Manhattan is shuttered due to the pandemic. Broadway is dark. Concerts are postponed indefinitely. Restaurants are open but at limited capacity, and office buildings are largely sitting empty as employers continue to have staff work from home due to coronavirus concerns.
It’s not shocking, then, to learn that Manhattan landlords have a vacancy problem on their hands. In December, the vacancy rate in New York City was 5.1%. But in December of 2019, it was 1.81% across all Manhattan, Brooklyn, and Queens rentals. And while that excludes two boroughs, much of Staten Island is single-family homes that are owned, not rented.
Some landlords are getting so desperate to fill apartments that they’re offering concessions like free rent. Others are offering tenants a substantial reduction in rent.
In fact, in New York City, the average price for a one-bedroom apartment is $2,460, reports Zumper. That’s an 18% decline year over year. The average two-bedroom apartment, meanwhile, is priced at $2,550 — a 23.2% year-over-year drop.
But while some New York City landlords may be desperate to fill vacant apartments, others are taking a different approach to the ongoing crisis: They’re holding back listings. But is that a smart move?
Keeping apartments off the market
The logic behind withholding Manhattan apartment listings is simple. Rents have been on a downward spiral, and the more leases that get signed at a discount, the more the city’s average rent is apt to drop. By keeping homes for rent off of the market, landlords are hoping to stop the bleeding. If demand for Manhattan apartments increases, those landlords can then list their property and potentially command higher rent for them.
It’s a reasonable strategy but a risky one for one key reason: We don’t know when the Manhattan rental market will turn around. While a widespread rollout of coronavirus vaccines could help bring the pandemic to a close, that’s unlikely to happen until late 2021 at the earliest. And given that New York City landlords still have their own expenses to cover, going without rent for months on end may not be feasible.
Furthermore, until the pandemic truly wraps up, it will be difficult to get a handle on the long-term work-from-home trend. Right now, rental demand in the city is low as people continue to do their jobs outside of office buildings. While some employers say their staff will return to the office once it’s safe to do so, others are more wishy washy. If remote work continues on a large-scale basis well into 2022, demand for Manhattan rentals may not pick up the way landlords might expect it to — hence the risk.
Of course, there’s an alternate strategy to withholding vacant apartments that landlords can look to employ, and that’s short-term leases. That way, they collect some rental income without locking themselves into a reduced revenue stream for a year or longer. In fact, a lot of New York City residents may be in somewhat of a state of flux themselves, so signing shorter-term leases could be a mutually beneficial arrangement, as well as a less risky prospect than holding back vacant apartments altogether.