Expect 4-5mo free come Winter

Here is an example of one of the Related listings
https://streeteasy.com/building/the-westport/505?card=1

Since it was quoted in the article, I looked up the first listing at Gehry. Down 20%, plus 3 months:

https://streeteasy.com/building/new-york-by-gehry/57a

Believe listing price is net effective. 20 percent down factoring in 3 months free.

Yep, I think you are right.

ToRenoOrNotToReno, my call was that transacting rental prices will bottom this winter (Dec-Feb), not Q4. 30yrs call was that next winter will (may?) be worse. (30yrs, correct me if I misstated our guesses as of a month ago or so.)

Perhaps 30yrs will be right, I’ll even be happy if he is right. But why would that article be supportive of next winter over this winter? If the quote you pasted indeed plays out and LLs are offering 4-5 months free this winter, what happens next winter — they start doing 7-8 months free?

Even 300 Mercer (the building) is giving 2 months free on selected apartments despite having 10 vacancies in a 300 unit building.

300_mercer, what is your relationship to the 300 Mercer building?

Former resident.

I wish StreetEasy would force everybody to use the new (extremely more transparent format) of presenting face and net rents.

As far as rental prices my recollection is that my position was that I thought (and still do) that by August 2021 prices would not be rebounding to (beginning of) August 2020 levels )much less anything close to pre-covid levels). I wasn't going to (and still won't) predict Winter 20201 prices vs Winter 2022 prices because too much of that is based on "fictional" (we can agree to disagree on what "market pricing" is, but what I think the takeaway from this article is that actual market is lagged by what landlords are currently showing publicly at any time) current pricing and no way of knowing when we see reality shown.

I don't know if any of that makes sense but my dinner is getting cold.

Irschober, Are you a renter or owner? If former rent-stabilized or market rate?

10 units seems to be a common limit for buildings to list at once. Many do not even go that high. 8 Spruce (New York by Gehry, 898 units) definitely does not have 6 vacancies.

pier45, From what I know, 300 Mercer building will list all. A few weeks back, there were only 5 or 6.

Indeed went beyond SE to their own websites. NY by Gehry website lists 24 vacancies and 300 Mercer lists 25 vacancies. I still wouldn't put money on either being the real extent of vacancy.

Also, a couple of listings are sub-leases.

If for no other reason that, judging by the large building I live in, maintenance is taking longer now to turn over units. They have been fixing up the 1 br (which was occupied for one year) for about two months now, with workers in there a few hours a week. Still not listed.

edit: 1 bedroom apt next door.

Ah. They are saving money by not listing all on Streeteasy.

30, I agree with Aug 1st 2021 being lower than Aug 1st 2020. But I think the “come to Jesus” reckoning will come sooner (this winter) before salvation arrives in the late spring / early summer in the form of a vaccine deployment / living with the pandemic / etc. That does not mean a giant bounce, just getting past (say) 4-5 months free rent.

I was looking at 300 Mercer (the building, not the man, attractive as he maybe), and it seems like they are in La La Land with trying to maintain headline rent while giving 2 months free. The increase from the bottom will be slow, and people won’t be eager to sign up for a big bump a year from now. It seems like another example of trailing the market to your own detriment.

I definitely agree that at some time in the future prices will hit bottom and then something will happen to make them go up by some amount again.

I agree that a vaccine will be a key ingredient in a turnaround, but I'm not sure that just a vaccine is going to cause enough of a resurgence to "save" the market because as I've been jumping up and down about since before COVID-19 I've been seeing a bunch of endemic problems in the market which were going to cause problems which were accelerated due to the crisis.

This is true in more than just NYC Real Estate. In a lot of press about many businesses closing, you see some allusion to "the problems were there pre-Coronavirus." So I think even after any solutions, the Real Estate market in NYC still has to deal with pre-existing conditions.

But let me be clear that I think we are largely in agreement, just calling it a little differently. I think there is a lot of the behavior you are pointing out in 300 Mercer going on. But I also think at some point that dam has to break. I can't tell you when that's going to happen, but I think such an event could easily undo all of the upside which a vaccine would turn out.

For example, how long do you think Stuyvesant can keep on going with a $50 million plus annual vacancy loss?

Inonada, mostly I was just poking hornets nest in naming names, but secondarily I assumed we were talking about economic (ie net effective) not headline (gross) rents in our predictions.

To echo 30’s prediction, I think economic rents will be lower in 2021-22 than 2020-21, and it’ll be in large part from lowered nominal gross rents (let’s be honest, when you start giving 5 months “free” your gross pricing ain’t anywhere close to realistic for years 2-beyond)

When you give 5 months free rent, your tenants don't qualify for the renewal.

30/others who renewed, Any idea how much of a rent break existing tenants are getting on renewals? I do not see landlords offering the same deal to existing renters.

Reno, Did you renew?

I’ll put you down for winter 21/22, ToReno.

30, I agree the RE market was going through a slow reckoning that has been accelerated by COVID. This reckoning definitely won’t bottom winter 20/21, IMO. I think even winter 21/22 is too early.

However, I’m not sure that has a whole lot to do with rent. No matter who owns the RE, how flush or distressed are financially, etc., LLs (or banks) will charge the highest rent possible. We have had a loss of 15%+ in demand for residency. Supply grows slowly (a couple percent a year?). If anything, distress removes supply that would have otherwise been there. So my call is really about demand returning. I think owner distress will continue to be there, even if (say) half the demand returns to buttress rents.

I can't imagine wanting to move into a high floor apartment in particular right now. Extended time in an elevator cabin shared by hundreds of other people, regardless of PPE does not sound like a good idea.

300, I get a sense (from the terms & conditions) that many places match gross rents for existing tenants but not free months. That’s probably the best way to play it in terms of not pissing off your existing tenants.

One anecdote is that some friends who had renewed pre-COVID broke their existing lease with a 1-month penalty (contractually allowed) and got a larger place in the same building with 1 month free (netting that piece out) at something like 15% off gross rent. They went with a 2-year term.

Makes sense. Guessing the existing tenants are certainly getting some breaks but no more than 50% of the breaks being offered to new tenants on a net effective basis. I wonder why the landlords name the discounts "landlord pays moving cost" up to 2 months of rent. It will make the existing tenants feel a little better emotionally if they do not get the same discount.

landlords "do not" name

300, no my wife and I didn't renew and we moved into George's guest house in Nowhere, USA.

J/k, but my wife and I did leave the city and have been working remotely since March/April. If we can continue working remotely, doubt we'll be back given the burden of taxes / living space of a growing family.

Ha.

If the burbs are working for you, no reason to move back.

ToReno, do you think you’ll be able to continue to work remotely once the office is declared back to normal? I ask from both the perspectives of being told to come back explicitly, or for implicit reasons (e.g., inferior productivity and/or career path)?

I am going to give a plug to growing up in the burbs of Nowhere, USA: Quality of life was idyllic and relatively safe on a daily basis. I didn't know what I didn't know and was more than content to play kick-the-can on the cul-de-sac, ride my bike everywhere and play with my friends and dogs on the abundant grassy terrain. On top of that, imagine my delight to discover all the more the world had to offer upon venturing beyond Nowhere! I thought Nowhere was awesome, but it turned out there was even more awesome everywhere I turned.

Meanwhile, those I know who were raised in NYC have been perpetually underwhelmed by most other places on the plant. If you start with NYC as your baseline, it is pretty tough to improve upon.

The upshot: If I had children, I would probably raise them in suburban Nowhere, USA because (1) I would not be able to afford to raise them in NYC the way I would want to; and (2) I quite liked growing up in suburban Nowhere.

As a final note, I commented elsewhere that I might think twice about raising my fictitious children in suburbia were I a member of a minority, but my husband assures me that growing up as one of the very few Jewish individuals in his small Appalachian town was very good for him. While he felt the sting of being "other" more than he ever admitted, he says that he is glad that he was raised with that perspective.

>> I can't imagine wanting to move into a high floor apartment in particular right now. Extended time in an elevator cabin shared by hundreds of other people, regardless of PPE does not sound like a good idea.

From the perspective of the amount of time in an elevator, walk ups are optimal. But if you are looking to minimize time in an elevator, a low floor in a tall building is the best way to go. I.e., you’d rather be floor 10 in a 50-story building than floor 7 in a 10-story building. All elevators pretty much take just under a minute from the bottom to the top, regardless of height. I think you have to put as much money into elevator costs as it takes for that to happen, because top floors that take 2 minutes in the elevator don’t play very well in showings.

That said, I don’t think time in an elevator is that big a risk. We have not had clusters related to it, likely due to large degrees of ventilation that occurs when you push that much air around at high speed.

As someone who has been on a high floor during this time, I gotta say that the light & open views have been a blessing from the perspective of not feeling cooped up. So if you think the incremental risk is small in relation to your personal situation, I’d recommend it. The value of light/view is higher these days as one spends a lot more time at home compared to normal.

Two of my children were born and raised in Manhattan, And I can tell you they wouldn't have had it any other way. And even though they were born and raised in one of the greatest cities in the world, the rest of the world never ceased to amaze them! Especially my oldest daughter who lives/loves to travel. I would say the same thing about their mom who was also born and raised in Manhattan, however I know prefers London and Paris.

I do acknowledge they had some advantages that not everyone that grows up in a city has. They grew up in a brownstone, and were fortunate to grow up traveling. But they're both New Yorkers to the core. I'm proud to say they definitely weren't jaded New York City kids...

I didn’t mean to come across as knocking raising kids in NY; I think it would be an extraordinary place to grow up. Just saying that moving to suburbia in Nowhere, USA has its attributes as well.

inonada,
I think you might be ignoring how long the development cycle is. We still have things like 5000+ new development Condos which haven't hit the market yet (some amount of which will probably end up shifting to rentals), something like 8,000 rentals in the pipeline in LIC, etc.
I think that "distress removes supply that would have otherwise been there" is probably 3 to 5 years down the road.

@mcr don't take it the wrong way I didn't think you were knocking it! Just adding the perspective from two kids that grew up in New York.

There are 900K housing units in Manhattan. About 300K condo/coop, 300K market-rate rental apts, 300K rent-stabilized or the like. Census bureau has Manhattan at 24% owner-occupied, meaning 75K of the condo/coop units are rented:

https://www.census.gov/quickfacts/newyorkcountymanhattanboroughnewyork

So that gives 375K market rate rental units and 300K rent-stabilized. We are seeing evidence of large amounts of vacancy. E.g., Miller Samuel will probably go from 15K to 20K this month, not counting shadow. Buildings are showing 15%. The article from the OP quotes Stonehenge at 15%. StreetEasy shows 25K right now. Let’s estimate reality at 15% of the 375K market, nothing from rent-stabilized. That ends up at 56K units of vacancy, about 50K higher than normal. Maybe that’s wrong, maybe it’s 40K, but nevertheless is some huge outflow.

On the flip side, new dev in Manhattan is on the order of 5K per year or so, right? The sudden single-year outflow/ inflow dynamics of 50K people are going to overwhelm the steady 5K increase in supply. Even if just 20% / 10K of leavers come back, and all the 5K new dev becomes rental, that still reduces vacancy.

>> @mcr don't take it the wrong way I didn't think you were knocking it! Just adding the perspective from two kids that grew up in New York.

But to MCR’s point, they do live in NYC and wouldn’t have it any other way, no?

My daughter and her husband live in Manhattan. My point was they (two oldest) would not have had it any other way regarding growing up in New York City.

Regarding Prism, I saw that they are now doing 18 month leases as the base pricing. So 3 mos free is really more like 2. Still potentially a lot.

Mrs George also is from the city, and she has been disappointed in every other place where she has spent time. But she also is too young to remember the bad days of NY and expects the city forever to be like it was under Bloomberg. When a mom friend and her kid got attacked by a thug swinging a chain near Madison Sq last week, it really freaked her out. Whereas I'm like, "yup, that's what happens in the city."

I would have been a goner had I been raised in New York. It is the city that got me over San Francisco (and San Francisco is the city that got me over Paris). I have not lived in London as an adult, but everyone I know who has - seriously 100% in my personal research - says that is the city that they cannot get over.

300_mercer, I missed your question a while back. Do you mean in 300 Mercer? I do not rent nor own in that building, though I do not live too far from it (co-op owner). I had a childhood friend who lived in that building and I remember hanging out with them on the rooftop pool a lot so your username always piqued my interest.

Why do you ask?

Wanted to understand the perspectives depending on ownership vs renters. I am an owner in the village.

Tone deaf to the current market?
https://streeteasy.com/building/315-7-avenue-new_york/9c

That bathroom...

Given some of the bathrooms we've seen on SE, that's pretty mild. It's only a rental: How over-the-top were you hoping for?

It does highlight the fact that unattractive is available at all price points.

Miller Samuel data out for Sept on inventory. A bit higher than Aug (15K=>16K), but trajectory not as rapid:

https://www.elliman.com/resources/siteresources/commonresources/static%20pages/images/corporate-resources/q3%5F2020/rental-09%5F2020.pdf

Do we know where the numbers come from? Because we know the amount of vacant units not officially listed has boomed.

https://therealdeal.com/2020/10/27/urban-flight-job-losses-will-hurt-apartment-reits-report/

http://investors.equityapartments.com/file/Index?KeyFile=405739411

Equity Residential reporting that leasing rates for its "Urban Core" (which includes Manhattan/Brooklyn, Downtown Boston/Cambridge and Downtown San Francisco) properties had the following trends:

- Q3'20: (14.7%)
- Sep'20: (17.9%)
- Oct'20: (21.4%)

Applications were up +108% YoY in October, which to me suggests landlords are desperately competing with each other to keep "asses in seats" (i.e. occupancy high). And yet occupancy trends for EQR's properties (arguably some of the best in the city) are as follows:

- Jun'20: 92.5%
- Sep'20: 89.2%
- Oct'20: 88.9%

A long cold winter won't help.

And they're talking about a lot of snow.

https://therealdeal.com/2020/10/28/equity-residential-hit-with-58-decline-in-profits-in-q3/

At least NY is in good (bad?) company:

https://www.bloomberg.com/news/articles/2020-10-20/real-estate-market-rental-apartments-houses-pile-up-from-new-york-to-singapore

https://nypost.com/2020/11/12/manhattan-apartment-vacancies-hit-highest-number-in-over-a-decade/

At least it’s flattening, acknowledging we don’t know if shadow inventory is flattening as well:

https://www.millersamuel.com/files/2020/09/Oct20MHTrent-nlINVmos-scaled.jpg

Another fun chart, showing 15% drop on headline rents & 20% drop in net effective:

https://www.millersamuel.com/files/2020/09/Oct20MHTrent-conc-scaled.jpg

That's some slope.

@nada & 30Y: Yikes. So rents are back to 2010-11 levels, inventory is at 2010 levels, but pricing (at least according to the SE Price index) is only at 2014-2015 levels. Something has to give.

Don't forget none of these charts account for tenant paid fees.

In my corner of the rental world, rents are below 2010. For example, the apt that I rented in 2010 at 12% below asking price is on the market right now. Its current ask is what I paid (12% below 2010 ask). When I rented it in 2010, it had been on the market about a month. Now it has been on the market for 4 months without any takers.

When my lease came up over the summer, I emailed a few brokers to inquire about rentals they had and whether owners were flexible on price. For one, we were told to make an offer, so we did. It was aggressive but not crazy, about 25% off pre-covid ask. That unit is still on the market, along with several others in the building. Another broker was more creative : "We have two applications. Neither had mentioned price as an issue, so I don't think there's much flexibility." It's still on the market too.

When do you guys think these folks cave? February? Also, I wonder how rental owners will think about lease tenor... would they prefer to lock in occupancy for 2 years (but at current market rents), or will they tell prospective tenants to F off trusting (hoping?) they'll get a quick rebound in demand by 2H-2021 to secure higher rents for Year 2?

Some landlords remain hardline. At Peter Cooper Village/Stuyvesant Town they are holding to less than 10% off peak rents (face), not negotiating on renewals, and vacancies are piling up. I've been told it's over 1,000. I don't think they have any plans on changing strategy but I have to wonder at what point they can't just keep pretending everything is ok.

It only makes sense to lower prices if it results in significantly more tenants coming in. Say you reduce price 10% but only have 5% more tenants. It's not worth it.

I’m think more about one-off condo landlords where there’s less game theory on the impact to the rest of your rental portfolio

So this month 5% of your tenants don't renew their leases because you won't negotiate rent. And then next month you lose another 5%, and so on. After a year of this you're 60% vacant. How far ahead are you at that point? Even if you want to say half that you're 30% vacant. Still ahead of the game?

https://www.youtube.com/playlist?list=UUdz4Sz51f2FbjncnzyU7A5g

Viola, 4 months free!

https://streeteasy.com/building/26-washington-square-n-new_york/2

George, How many $ per sq ft per month? WIC in master?

And you will need those 4 months of free rent to offset the expense of new dishes if you act on the floorplan's representation of that appliance as a dishwasher. (And where is the DW, anyway?)

Also, "Avoid elevator crowds and/or congested hallways" is the cleverest way I've seen to say 'walkup'.

Another 4-monther. I wouldn’t take it, but there it is:

https://streeteasy.com/building/400-west-61st-street-lincoln_square/1208

Maybe 4 months free would help these numbers.

https://therealdeal.com/2020/12/01/bad-year-1-in-5-units-at-gehry-skyscraper-goes-vacant/

Interesting article today from Bloomberg titled "Bank of America jolts traders with flat bonus pool in omen for Wall Street."

https://www.bloomberg.com/news/articles/2020-11-25/bofa-jolts-traders-with-flat-bonus-pool-in-omen-for-wall-street

This is something close to my heart and I've come to these boards through the summer to say don't expect strong bonus pools in 2020 despite the strong stock market.

Agreed @Tomnevers, I was saying the same thing months ago
Trading did well and wealth management held it's own... but any of the banks with consumer exposure (JPM, BoA, Wells, Citi) are going to be doing everything they can to avoid paying people.

DB & CS continue to muddle on with their US operations on death watch.
Further there's already been headlines of GS resuming layoffs that they froze due to covid.
And don't forget MS is in the middle of integrating ETrade into their wealth platform.

Not a ton of M&A dealmaking, nor IPs, and plenty of PE managed retailers going under this year.

HF has been a mixed bag from some of the Hedge Fund stats I've seen this year... the ones that performed will pay out. There continues to be a lot of pressure on the industry as a whole to consolidate into the multi-manager model as the smaller funds can't compete on costs.

The idea that the spigots are about to open with copious amounts of bonus money flowing back into Manhattan real estate is broker babble.

Tomnevers, Wall Street employee mentality is crazy (trying to be polite). Flat bonus in Covid is nothing to complain about. People are dying and service/retail workers do not have jobs. Flat bonus is pretty fxxxing good. They should be ecstatic. For every mid career banker who didn’t make it, they are many young people making a killing relative to what they made before. This has always been the way of Wall Street. Without knowing which way the NYC real estate market is going to go, with lower rates and lower prices, one can clearly afford more apartment vs last year if they wanted to buy.

4 months free at 160 west 24th

https://streeteasy.com/building/the-chelsea/7g?featured=1

For complainers on Wall Street:

https://www.wsj.com/articles/from-pilot-to-truck-driverairline-careers-grounded-by-pandemic-11607367164?mod=mhp

Boom! 5 months free!!!!

https://streeteasy.com/rental/3355914

Curious if it ever rented for the full price or do they make it up? Call it 1200/1300 sq ft with views in a bad location.

Nice find! I was about to share my snarky story of the half-baked demo unit, but realized that was actually 1 Dutch not 19 Dutch, so they're spared embarrassment for now.

Agree it's an unremarkable 2/2 that would struggle to fetch over $7k in the best of times, despite the 62-story view and great location.

Despite my dislike for Fidi due to narrow streets combined with tall buildings, I would have thought a little higher for rent at 8k in 2019 but I do not know the rents in that area well and the building is not stabilized yet.

Next prize is for 6 months free.

As for 19 Dutch, their website makes no mention of the gross rent. You'd think Greystar wouldnt play stupid games like the low end brokers I love to rag on.

The website also references "Dutch values" which caused a chuckle. The most distinctive value I associate with the Dutch is extraordinary cheapness.

In FiDi, 1200sqft with mid-tier finishes and amenities used to run high $5s. Glut of condo "investors" has pushed it down to the high $4s since Covid, sometimes less if they're desperate.

There's a premium for being on a high floor right atop Fulton, don't get me wrong, but I don't think it's a 2X premium.

My grandfather came here from Holland along with his brother and four sisters when he was around 6. I don't like to say cheap, how about frugal ; )

That said he never wasted a penny on anything that was inherently cheap or poorly made. He would rather do without or somehow improvise.

Here's some Brooklyn buildings with 4 months free on 12 month leases

https://streeteasy.com/building/denizen-54-noll-street-brooklyn/8475
https://streeteasy.com/building/the-dean/201a?card=1
https://streeteasy.com/building/the-denizen-x/3120

Hey richardberg - one can pay much less than that, if you don't mind only having one window in your entire apartment

https://streeteasy.com/building/90w-90-washington-street-new_york/15n

For kicks, I went & visited 19 Dutch today. The common areas are nicer than I expected, but the apt itself is even more blah than it looks. Views from the Beekman hotel across the street are much, much better, even @ 20 floors lower. https://streeteasy.com/building/5-beekman-street-new_york/45a

PS the leasing office said they're not allowed to discount the gross due to the 421a in effect. That smells fishy to me -- I suspect what they really mean is, if they ever lower the gross, then they won't be allowed to raise it back until the abatement expires.

I viewed an apt at 5 Beekman last year and came away unimpressed. For the price/location, the build quality seemed poor. Views on one side obstructed by a newer building, perhaps there are more to come? And the gym was depressing.

On the topic of the bottoming of the rental market, for those who like to view in slow motion, here is some new data:

https://www.millersamuel.com/files/2020/12/Dec20MHTrent-avgMED-scaled.jpg

https://www.millersamuel.com/files/2020/12/Dec20MHTrent-vacCONC-scaled.jpg

https://www.millersamuel.com/files/2020/12/Dec20MHTrent-nlINVmos-scaled.jpg

All of face rents, discounts, vacancies, and inventory seem to have blips showing a winter 2020/2021 bottom. Or they’re just blips.

In any case, between that & vaccine, I’m feeling pretty good about my call on a winter 2020/2021 bottom for rents.

Not so much a blip, fun to look at rents in a longer-term context:

https://www.millersamuel.com/files/2020/01/4Q20MHTrent-rentVsale-scaled.jpg

15 years ago in 2006, median face rents were ~10% higher. Make it ~15% if you add concessions. And make it ~50% if you adjust for inflation.

Re 421a, that is complete b.s. and should be reported and investigated by the state. 421a leases are rent stabilized. 5 months free is clearly abusive of the program.

Nada, Thank you for the charts on rental blip. I think the blips are very meaningful. Renters have another month to get great deals but after that the concessions will reduce in general rental market. Vaccinations have finally picked up speed.

@Nada, agree the Beekman gym (fitness center, really) is lame. And access requires some awkward weaving through the hotel areas.

What would you offer for 45A? Supposedly took multiple applications last week, if the abfab agent is to be believed.

@mercer People are slowly coming back to the city, however, I believe there are a lot of renters that are currently occupying apartments and not paying any rent. They cannot be evicted until May. Would imagine a lot of new supply on the rental market after May, though maybe this mainly applies to the other boroughs rather than Manhattan.

I believe big chunk of non-rent payers are in rent-stabilized or lower end rentals and they will probably stay once they start to pay new rent dues leaving the past rent payments in some type of limbo unless govt will pay.

RB, with the following caveats:

- I am not in this market so I have no idea where the ask is relative to comps
- I have not been on the hunt for 3 months in a very fast-changing market

I would be inclined to bid $9K with 2 free months on a 3 year lease, with an eye to close at $9K-ish avg for the 3 years. I.e., the ask is “$9K for a year” so that might be a way to close the loop to “$9K for 3 years”, softening the acceptance of “20% off”. At this price point, given the ask I don’t see a bidding / negotiation path toward (say) “$8K for 3 years”. One would have to wait for a price drop for that to become realistically closeable, I think.

Now is $9K a good deal? Good enough, I think. Assuming a peak price of $3.75M, the rental yield becomes 1.5%. We’ve seen as low as 1%, I suppose, but typically that has been at a higher price or for an oddball reason ($3M 1BR, anything with the name Trump on it, etc.).