Expect 4-5mo free come Winter

>> Supposedly took multiple applications last week, if the abfab agent is to be believed.

Existence of other bidders rarely makes much of a difference in how I bid. Perhaps a little on the margins, but more often it becomes about the style of the bid. If I am in a “highest price wins it” situation, I don’t want to “win”: no apt matters that much to me. But it could be that owner is looking for X (where X is non-monetary) while bidders are offering Y. An easy way to get at that is to simply ask abfab broker, “You said you have multiple bidders, right? What’s the owner looking for?” Could be “more money”, could be “not an a-hole”, could be “longer-term tenancy”, could be “no pets”, could be “not in such-and-such industry”, etc. Brokers tend to share something, and whatever it is, it becomes useful info.

Nada, Have mercy on the landlords!!

A single data point. We rented our 3 bedroom apartment for 9% less than pre Covid tenants were paying. We paid broker but no free months. New tenants moving in 2 weeks after old move out.

A single data point. We rented our 3 bedroom apartment for 9% less than pre Covid tenants were paying. We paid broker but no free months. New tenants moving in 2 weeks after old move out.

Not bad, all said.

More good news from Curbed:
https://www.curbed.com/amp/2021/01/wealthy-new-yorkers-are-returning-to-the-city.html?__twitter_impression=true

I'll toss my own data into the ring:

I rented my LIC Condo this week. Finally, after being vacant for Dec.

It's been rented for -13.5% of last years rent w/zero free months.

I also rented a Williamsburg 1 BR Simplex in June for a 22% increase from the current rent w/zero free months.

I never rent in the winter but my last LIC tenant lost his job and had to break the lease. My sense of the market was there were a lot of tire kickers out there waiting to move in Jan/Feb.

The market was slow with people sort of paralyzed by the possibility of discounts / choice / facing zero pressure to move on an apartment. I had a lot of people love the apartment who in a normal year would have signed that day but in 2020/21 felt like they could keep trolling for something better.

https://www.bloomberg.com/news/articles/2021-02-11/manhattan-landlords-offer-record-perks-to-fill-empty-apartments

Maybe this has been posted already
https://therealdeal.com/2021/01/29/two-huge-long-island-city-rentals-see-occupancy-plummet/

A new month of data on Miller Samuel confirms the picture of a winter 2020 bottom again:

https://www.millersamuel.com/charts/manhattan-inventory-new-leases-and-monthly-absorption/

https://www.millersamuel.com/charts/manhattan-median-monthly-rent-net-effective-versus-face/

George >> Next prize is for 6 months free

https://streeteasy.com/building/the-mango/14c

What do I win?

Nice find, RB!

Just you wait, though: there will be 12 months free come next winter.

Not fabulous but a great deal if you can tolerate it.

Ino, do you consider the Manhattan rental market "recovered" if landlords are giving 3-4mo off next winter? I don't

Nah, that’s just halfway back to where we were last year. We were just trying to call the bottom for giggles here, and to help me decide whether to move this winter or wait and see.

If last year was 100, this winter was 65-70. I think next year will be 85-ish. Now others might consider “recovered” as 100, but I don’t.

I entered the NYC market in the mid 2000’s, to a cacaphony of proclamations about ever-increasing rents at 4-5% a year. I shook my head and mentally signed up for CPI / inflation rates of increase. It materialized much less than CPI over the past ~15 years, go figure.

So by that measure, we need to get to 120 to get back to “recovered” in my longer-term book. Anything below that is gravy to me.

Richard wins the right to be the named plaintiff in a class action!

https://www.brickunderground.com/rent/my-lease-came-with-free-months-rent-concessions-preferential-fight-renewal-increase-nyc

After reading ToReno’s post from some months back showing EQR’s NY occupancy rate dipping below 90%, seems like it’s back above it:

New York – New York continues to feel the outsized impact of the COVID-19 pandemic but there are early signs of recovery. We recently had our best Traffic week in the last twelve months and our best leasing week, in terms of applications, since August 2020. Leasing activity is still driven by deal seekers and intra-city movers who are running about 10% higher than normal. We still see residents continuing to leave the city with most of our residents moving to surrounding states with suburban New Jersey capturing the largest share, but that number is normalizing. Physical Occupancy has improved in the market and is at 91.2% at January 31, 2021, which is the first time it has exceeded 90% since September 2020. We believe the broader recovery in this market will be fueled by a lack of competitive new supply, the return to office and the continued growth of technology employers. Many of these technology firms continue to expand their investments in this market, even during the pandemic, supporting the view that the city will continue to thrive, as it has in the past, post-pandemic. For 2021, our focus for New York will be recapturing as much Physical Occupancy and rate as possible while lowering, or possibly eliminating, Leasing Concessions. Recovery in this market will take some time but it also has significant upside potential given 2020 declines.

I don't think we have seen a full cycle yet. Some owners (like EQR) gave large rent breaks/concessions early on and have been luring tenants from other owners who refused to lower rents for renewing tenants. But those owners are racking up some obscene vacancy rates (which you won't see publicly stated anywhere). At some point they are going to have to stop their delusions that the market is coming back and compete (the RE version of a short squeeze?). I'm willing to bet as these dribble on the market eventually players like EQR will feel a new round of either vacancy or further price cuts/concessions. We already see that even though everyone is screaming about volume, it's due to record concessions and vacancy rate (the real one, not the published one based on listings) is still hitting YOY all time record highs (i.e. vacancy rate for each month continues to be the all time high vacancy rate for that month). To me that's proof that we are seeing more of a market churn than improvement.

I think there's even someone here that wasn't really looking to move but the economics of the situation just made doing so too good not to.

As usual, good posts by both Ino and 30yrs. Just to add some more tangible datapoints, the mortgage servicer reports for 2 brand new LIC apartment buildings showed 67% and 59% occupancy. I know it's LIC, but I have a hard time seeing how Manhattan rents get back to prior highs when a fully-functioning NYC Subway system offers 1 stop access to Midtown from multiple brand new development complexes operating at sub 70% occupancy

https://therealdeal.com/2021/01/29/two-huge-long-island-city-rentals-see-occupancy-plummet/

I agree with your points on a churning market, 30yrs. However, I disagree with your youthful optimism about the motivations of RE owners, inspiring as it may be after all your time in RE.

After years of paltry positive yield on equity, I think they will be perfectly content to sit on paltry negative yield for years. Sure, they could mitigate some of that negative yield by dropping rents & increasing occupancy. But that would admit a "loss".

I'm afraid you suffer from legacy thinking. You keep forgetting that no one is in RE to get rich anymore. It just serves as an alternative to earning 0% on cash in the bank. So as long as you earn 0.01% and ignore the bumps along the way, after a decade or two, you still count it as a "win".

I believe there was a discussion on this board about how EQR was in fact not lowering rents early on, since it can be better for them to have lower occupancy but higher rates. (e.g. you can have 100% occupancy at $1000, or 75% occupancy at $1500 - lower is better in this case) For an individual owner where their occupancy is either 0 or 100, you take whatever rent you can get. There's almost no value to vacancies unless you think prices are about to soar. Which I don't. Maybe some people do.

When we are seeing buildings with both 25% lower real rents and 35% vacancy I don't think we have either "paltry negative yield" or "75% occupancy at 50% higher rent," but everyone can feel free to keep using hypotheticals which don't exist to describe what the market might be doing and ignoring what it is actually currently doing.

Let's use ToReno's link as an example. The Tishman Speyer one has 60% vacancy. The seem to be following a strategy of increased rents, with a 25% concession to new residents. Here are a few of their recent listings with a history:

https://streeteasy.com/building/28_10-jackson-avenue-long_island_city/03h
https://streeteasy.com/building/28_10-jackson-avenue-long_island_city/42k
https://streeteasy.com/building/28_10-jackson-avenue-long_island_city/35d

I am not defending their strategy, but that's what they are doing. So that 60% vacancy rate is there, at 25% lower real rents for new residents, from a base that is meaningfully higher than what they were asking in 2018/2019.

Big-picture, they have a $1B 10-year interest-only loan. Here is structuring of most of the loan stack, with the missing $275M pari passu with the A tranche:

https://www.spglobal.com/_assets/documents/ratings/research/2332407.pdf

Here are the coupons they pay:

https://finsight.com/deal-24900-jackson-park-trust-jax-2019-lic

Averages to ~3%, or $30M. Maybe I got something wrong, maybe it's $40M. But that's the range.

Page 24 here shows various models of their net cashflow (NCF) in normal times:

https://ireportscdn.dbrs.com/presale_reports/BANK%202019-BNK24_presale_report.pdf

You can see a net cash flow of $52M - $75M based on various models, on the back of gross rents of $88-91M (w/o vacancies & concessions).

S&P document also puts NCF in the same ballpark, I think:

>> The trust loan has a moderately high debt service coverage (DSC) of 1.87x, calculated using the
loan's fixed interest rate and our in-place net cash flow (NCF) for the property, which is 15.9%
lower than the issuer's NCF.

So great, we have a $1B loan on a $1.5B property (by generous appraiser valuation) or a $1.0B property (by S&P valuation). In good times, it nets $20-$40M for the equity holders. Now, half the $90M of gross rents have gone away (way). So, it's netting -$25M to -$5M.

How long do you think Tishman Speyer is willing to keep writing checks of that size so as not to lose their equity positions in what is a $1.0B-$1.5B property in their minds? I'll go with "years".

Good primary data sources, thanks for that Ino. I don't necessarily agree with your conclusion but reasonable minds can differ. Asking LP's for $25m annual capital calls when your equity is worth somewhere between zero and $500 million gets tough pretty fast.

My point in referencing the new dev LIC rental occupancies wasn't to do a touchdown dance re: Tishman's bad fortune, but more to highlight how much occupancy needs to rise across ALL market rate apartments in Manhattan / Brooklyn / Queens before rents & property-level NOI recovers to pre-COVID levels.

I dunno about the equity capital structure, but they did pull out $357M of equity as part of the $1B loan at the end of 2019. Might be a few nickels lying around from that.

If not and no one wants to meet the capital call, have them give inonada a call to buy the equity for $1. I’m willing to pay $5-$25M for a 1-year option that it can become break-even in a year and then a $20-40M netting asset once more.

I don’t suspect I’ll get the call.

https://therealdeal.com/2021/02/23/extell-sells-stake-in-manhattan-rentals-to-rxr-realty/

I'm sure based on 2017 projections these guys are going to make a fortune of the land they leased for this project.
https://newyorkyimby.com/2020/09/tower-a-continues-rapid-ascent-at-601-west-29th-street-in-hudson-yards.html

https://nypost-com.cdn.ampproject.org/c/s/nypost.com/article/nyc-real-estate-market-housing-prices/amp/

ToReno>> I don't necessarily agree with your conclusion but reasonable minds can differ.

BTW, what is your conclusion about what they do? Choices seem to be:

1) Keep the course for another year, kicking up (say) $15M.
2) Change tact and drop rents in a bid to increase current cash flow by $5-10M, at a cost to future cash flow. Kick up less money this year.
3) Call it quits and declare bankruptcy.

I don’t think there’s a whole lot of difference between #1 & #2 (reasonable property manager minds can differ), but I don’t see #3 happening for some time. There are simply too many optimistic factors out there to lead a reasonable property manager to believe that a 15% increase in occupancy, enough to get cash flow to $0, is just around the corner.

Ino, I think it'll play out like you and George have both outlined elsewhere -- the LPs will muddle along in their investment for 5-15 years and post a LSD gain (CAGR) or LSD loss (CAGR) at the end of it. The GP sponsor will enjoy his construction / management fees but earn no incentive fee :)

As for the specific property, I think Tishman will do the same thing everyone else is going to do -- try to hold the line on price for another year, then when they realize 2022-24 occupancy isn't going to get to 2019 levels, lower for longer pricing starts to be the new MO.

Not an 'X months free' but this seems to be the current thread about the state of the market.

https://streeteasy.com/building/chelsea-mercantile/6i

Last year $14,950 with tenant paying fee, this year $10,500 with owner paying fee.

Down 35%?

This is definitely not a typical listing. The price is too high to begin with, that’s why it was sitting empty even before COVID. A single listing do not represent the entire market, especially of lower to middle end market.

Of course on renewal all the math changes but for year 1..
Factoring in a 15% commission isn't it more like
-40.5% annual revenue for landlord (2021 $8.9k after-fee rent vs 2019 $14.95k rent)
-39% annual rent for tenant (2021 $10.5k vs 2019 $17.2k fee-inclusive rent)

Looks like it's the original owner who purchased in 2000 for $972,000. Unless there's some sale in between there that I'm missing...

Sold for $4.9M in 2015 post-reno:

https://streeteasy.com/sale/1145188

Unsuccessfully tried to sell for 1.5 years in 2018-2019:

https://streeteasy.com/sale/1381897

When $5M apts with monthlies approaching $5K have trouble finding a renter who’d bid less than $10K after 6 weeks, I have a hard time seeing the sales market going up.

I hear what you're saying, but that 4.9 sale price was from the peak of the market. Where do you think it would trade today?

I'm sticking with we're modestly higher in June : )

SE Index has mid-2015 (when the apt was sold for $4.9M) and the first half of 2019 (when the apt couldn’t fetch a buyer at $4.95M) at the same level, about 6% below the peak. The current index level is another 7-8% lower.

In order for this apt to push the index up, it’d have to sell for $4.55M or higher. Given the failure to sell in 2018-2019, with a full 6 months asking $4.95M, that’s a tall order.

Stated another way, even $4.5M is a challenging price for a $5K-monthlies apt that has trouble renting at $10K. Back in the day, if you could find a $3M apt that rented for $10K, you were doing quite well rent-wise.

nada, While this is a very good example of rent still being very good, believe SE Price Index (not condo only any more) is equal weighted rather than price weighted. Since the higher end transactions are fewer in number, it may not impact the Index that much.

As we're doing these backward-looking comparisons, we're missing an important piece of info: the StreetEasy change a few months back to list gross rent instead of net means that we won't see concessions in the rental history. Already, apartments in this thread that you & I know rented for "half price" look like they found a tenant at full ask, if the SE timeline is to be believed.

Hey, I'm just a layman out here assisting people that have decided they want to buy an apartment, assisting in a transparent and financially efficient/beneficial way. Mostly ealing in the present moment.

Nada I know your brain is spinning on a different frequency than mine, but it just seems markets sometimes ignore a rational process. I think the real estate market is even more susceptible to this, it does things that just don't seem to make sense. It seems even more obvious than ever today that you can rent significantly cheaper than you can purchase, but it doesn't seem to proportionally disrupt the sales market. I think the x Factor is there are emotional components involved with purchasing, and whether or not it fits your model, many people believe ownership is better than renting.

After the incredible jolt to the financial markets in 2008, many of the threads on Streeteasy were filled with 'real estate is going to go into the toilet' themes. There were many on here that laid out some pretty good road maps why prices should crash, prime Manhattan at 500 a square foot. This math seemed to make sense to some very smart people based on the circumstances. The markets did the opposite, at least for the next 7 years. And if you look at the charts after a slow decline from 2015 to 2019, it looked like sales were starting to pick up, Noah and John also pointed this out in a Friday vlog. Then the pandemic.

So anyway, this isn't a post to challenge you or your ideas. Just some random thoughts from a guy trying to make sense of it all as I navigate financial and real estate markets myself.

I didn't think we would see the kind of recovery in prices and market activity that we are currently experiencing, 9 months ago. I mean I new things would eventually get better they always do, just didn't think it would happen as quickly as it has. And look at the equity markets... Wow.

Keith
TBG

All that said, 2/3 of New Yorkers continue to rent.

https://streeteasy.com/blog/why-new-yorkers-are-renting-not-buying/

Just me but 10k a month for a 2 BR seems high, even with the giant LR.

I noted upthread that I rented my condo at a 9% discount from pre-Covid rent. A second apt in my building rented in just 1 week for about the same discount. Facts on the ground seem to point to a market that is picking up.

Here's a fairly common response when we try to schedule appointments with just a few days notice. We received this this morning for an under 1.5 m two bedroom in Brooklyn.

Just like any one data point doesn't set the market, as a broker with a very active business I'm just bringing some of my day to day to the thread;

"Hi Norman,

Thanks for your interest! Apologies but I am fully booked for Sunday even after adding 2 hours. Are your buyers available during the coming week? I am very flexible with showings after Sunday and will be scheduling another open house soon.

Best Regards,
Greg"

Two weeks ago, I took buyers out in the same niche -- a 2/2 in Brownstone Brooklyn under $1.5 million -- and the unit that we saw was too small for us, basically the size of a pin. The listing agent noted that there were multiple offers at, or above, asking and called for Highest and Best. My response was "umm, not our party." In the interest of trying to separate smoke and fire, I'm still watching that listing, which appears, curiously, to not yet have gone to Accepted Offer.

ali r.

I wasn't really suggesting anyone should be buying, renting, whatever-ing this apt. Rather, compared to mid-2015 we are looking at:

- The same 5/1 ARM rate per Freddie Mac: http://www.freddiemac.com/pmms just shy of 3%.
- Monthlies that are 50-60% higher on this apt.
- A need for a 50% increase in current asking rent to achieve the old rent.

All that good stuff about people who prefer to buy vs. rent vs. whatever was there in 2015. I'm just saying that's a lot of extra gap compared to mid-2015 prices, which was only 7-8% higher.

Ali,
The market is certainly booming for broker bullshit. Just look at this thread.

I think I like 30yrs' vibe the most out of all the viewpoints here.

Moody's expects things will get worse after eviction moratorium expire.
https://therealdeal.com/2021/03/04/for-multifamily-office-landlords-worst-is-yet-to-come-moodys/

WSJ article about landlords taking inventory off market in the hopes of stronger demand come summer / fall 2021. Special guest appearance by our very own Mr. Walkup too!

What happens if demand doesn’t come surging back in 2H-21 like mothballing landlords want? Seems likely to extend the pain, no?

https://www.wsj.com/amp/articles/manhattan-landlords-take-apartments-off-market-during-rental-slump-11615140000

WSJ>> Some are calculating they can rent just enough of their units to cover their monthly expenses, “but then let’s take the rest and put them up for rent in a bit of a stronger market,” Mr. Walkup said.

Nada>> After years of paltry positive yield on equity, I think they will be perfectly content to sit on paltry negative yield for years. Sure, they could mitigate some of that negative yield by dropping rents & increasing occupancy. But that would admit a "loss".

This scorched-earth insanity shows how truly bad the rental market is, as well as how a lot of these landlords view themselves vs tenants. Firstly, these are not units which just became vacant - they have been vacant since at least January 1st and in most cases longer, some significantly. Example: the unit across the hall from mine vacated October 1st. It has never been listed on the market and even when I called the leasing office was told it is not available, yet there it sits. So even if prices rise 20% how long will it take to make up 9 to 12 months of vacancy rather than just rent at current market? (Also factor in that if prices rise they would have been able to increase rents on these units anyway). I think this shows these landlords believe "market" to rent out all their units is worse than the reports are staying.

I also think it is a game of brinkmanship to try and trigger the vacancy provision in the New York State Rent Stabilization statute. I predict this is another tactical mistake because in my opinion the same coalitions that handed the Real Estate industry it's head with the totally tenant sided version of the Housing Stability and Tenant Protection Act of 2019 will most probably just change that provision. I also think that Cuomo won't be in a position to prevent it given his recent issues.

Secondly, even if demand does increase significantly, what happens when these units all come flooding back on the market within a short time frame? Supply vs demand in pricing still holds. It won't be worth losing these huge amounts of rent.

Thirdly I think this proves my statement that the uptick in deal volume in January and February is more evidence of market churn rather than "improvement." That is to say rather than tenants moving back I think most of these deals are:
Landlords are giving both discounts off rents and concessions to new tenants but largely refusing to budge on renewals. So a lot of tenants who had no intention of moving but are being given extreme financial incentives to move and disincentives to stay are pulling the trigger. Often times moving very short distances (like the building next door, around the block, etc) to larger spaces for less money. This yields a false narrative of volume meaning the market is "improving." If the market was improving would you ever see this warehousing?

But it's the same in the sales market: if developers really believed how great the sales market was doing what are we still seeing with projects like One Wall Street? It was scheduled to launch sales over 2 years ago and wrap up in 2020. They announced Core as the sales agency but still haven't launched sales. If Macklowe believed the current hype why not? And that's not the only one.

Also note the reaction from legislators and housing advocates. This is not great PR for an industry facing a pretty big "cancel rent due to pandemic" movement. It totally contradicts the narrative of "poor landlords can't afford to lose rents" and "we will go back to 1970s with mass property abandonment." If they can afford to willingly carry large amounts of units vacant with no rent how can argue that forgiving rent to some occupied units will bankrupt them?

Good posts 30yr

Another good article out today, this time in Bloomberg talking about opportunistic investors buying bulk condo portfolios from overlevered developers. I wonder what will happen with the units these investors purchase -- must add to the rental supply stock over the near-term at the very least (1-3 years), at least until the sales market absorbs enough of the oversupply in the NewDev sales market.

https://www.bloomberg.com/news/articles/2021-03-09/for-manhattan-s-luxury-condo-glut-2021-is-year-of-the-reaping

Just to point out my posts were not in response to inonada because they were composed before I saw his last post. I don't necessarily disagree with his statement of facts, I just disagree with the wisdom of such a strategy.

But I also think Mr. Walkup's statement was a guess as to what is occuring, not actual knowledge of what these owners are doing.

You & I are in the same place about the wisdom of a strategy of holding back inventory, 30yrs.

If you are the entire market, then it may make sense to rent 80% at 90% of the price rather than 90% at 80% of the price. But if the market is so vast that no one player controls a large share, then you as an individual can get to (say) 100% at 85% of the price. Sure, there is a prisoner’s dilemma aspect to what I am saying, and this is a repeated game of sorts which encourages collaboration amongst competitors, but I agree with getting the rent while you can. As you point out, “warehousing” product today (March 2020 apt occupancy) has little bearing on selling product next year (March 2022 apt occupancy). All that happens is you let today’s product spoil and throw it away.

The difference between us, I think, is that I have achieved acceptance of (what I perceive to be) irrational market behavior. Hope is a strategy, especially when it comes to RE.

ToReno, thanks for the article. On this figure:

>> Combined, it could all break chunks off New York’s luxury condo iceberg, estimated at more than 15,000 unsold units across 900 projects, largely in Manhattan, with a total listed value of $45 billion, according to real estate data provider Marketproof Inc.

For context, total Manhattan sales (new dev or otherwise) run around $20B a year at $2M-ish average. That’s a lot of inventory.

Some are fleeing home from Florida
https://nypost.com/2021/03/11/wall-streeters-who-fled-to-florida-amid-covid-want-to-return/

"The difference between us, I think, is that I have achieved acceptance of (what I perceive to be) irrational market behavior. Hope is a strategy, especially when it comes to RE."

Exactly - I have achieved acceptance of it in both RE and Stock Market. I get the irrational RE buying based on my own irrationality when it comes to RE, but I will never understand the irrational stock buying. Anyone on here buy Roblox yesterday? Who is buying this stuff?!

“The main problem with moving to Florida is that you have to live in Florida”
Who wants to live on top of a swamp? LOL

And the whole peninsula will get flooded over.

Exactly: In Florida, you're likely not sitting in a good seat at the theatre, opera, or browsing a world-class art exhibit while the waters are rising. And those much extolled low taxes won't survive the need to replace drinking water systems, sewers, and other infrastructure as they are repeatedly breached and damaged from the rising waters and frequent storms. But then, if you moved permanently to Florida in your retirement, you probably weren't planning on living long enough to a) miss NY, and b) have to pay for the problems down the road.

I can see the attraction of FL for retirees in their 70s as dealing with cold weather, snow and related falls is harder at that age.

“ theatre, opera, or browsing a world-class art”

FWIW, this New Yorker hates theatre, opera, world-class art, theater, operettas, and shitty art. Why must every defense of New York start with a bunch of cultural crap? I like the density.

https://youtu.be/jGxuWWGo8AY

Heh

@Aaron2 believe it or not in Palm Beach, West Palm, there are some pretty good cultural events, from Opera, ballet, art and theater.

https://www.fourarts.org/

https://www.kravis.org/

https://www.norton.org/

It's enough to keep you busy in between fishing, golfing, birding, sailing, surfing and beach. But I agree, living in Florida is more about outdoor life. Its certainly not New York City London or Paris, but it's easy enough to get to New York from Palm Beach using the wonderful PBI airport. And of course there's even more in Miami.

I did enjoy the music and art scene in NYC, it's what drew me to move there in 1982. Nada you once asked what I was doing in the 90s, I think you were referencing how many of your friends at the time were looking to make money on real estate?? I was touring the world/making records in a progressive punk band, with a little bit of real estate in-between... So I am the artie type. But it was also about the density, diversity and overall vibe that was attractive enough to keep me in New York City full time over 30 years. ​

Keith Burkhardt
TBG

I think about the cultural crap because outside of work, it's what I'm particularly interested in: the performing and fine arts. I don't mean to say that it doesn't exist elsewhere -- I'm involved in funding arts organizations outside the urban centers, including Florida, but NYC has probably the greatest concentration of those things in the country.

And to inonada's point, I'm also here for the density: in a 45-minute walk to do errands, I got a pair of locking pliers, visited two shops to look for flower pots (found what I wanted), dropped off the laundry, and had a slice of pizza. All within 10 blocks of my apartment. I don't think that's possible most anywhere else.

No doubt Aaron, in my opinion New York City is the greatest city in the world. With Paris coming in a close second...

https://www.curbed.com/2021/03/manhattan-rental-deals-window-closing.html

“The window is closing,” said Lucas Callejas, a broker at Triplemint. “If things continue at the rate they’re going, I might dare to say that by the summer, the rental market will be recovered, and the price difference between then and pre-COVID might be minimal, if anything at all.”

“What has changed over the last month is the young professionals wanting to come back to New York City, even if they are working from home,” Gartenberg said. “I am seeing a lot more movement, and I’m seeing things renting more quickly. None of us have a crystal ball, but if you want those great deals, now’s the time.”

reno, I am still seeing 2 month free offers with no reduction on base price which is all time high.

>> If things continue at the rate they’re going, I might dare to say that by the summer, the rental market will be recovered, and the price difference between then and pre-COVID might be minimal, if anything at all.

I might dare say Lucas is deluded.

Here are some actual facts from Miller Samuel:

https://www.millersamuel.com/charts/manhattan-median-monthly-rent-net-effective-versus-face/

Face rents need to rise 22.5% from the bottom to get back. They’ve risen 1% as of Feb.

Net effective needs to rise 30%. They’ve rise 3-4% as of Feb.

It is a good chart. I also watch Related buildings and building 300 Mercer Street as indicators for rental markets. While I believe that we have finally picked up speed in vaccinations, it will take another month or two of people moving back into the city to reduce the deals from 2 months free to 1 month free.

I am similarly skeptical as to why news sources are giving brokers' opinions on the recovery of NYC rentals any credibility. The RE PR machine seems to be at play. They're going to push whatever story/angle they think will help them move apartments... you know... because they've collected sparse commission the past year and are starting to get eager to collect.

Landlords and brokers can want and wish things to go a certain way all they want, but that won't make it a reality.

Since the rental market is so red hot now, what will this rent for and how quickly, given it's $15,000 off what it used to rent for?
https://streeteasy.com/building/350-west-broadway-new_york/8?

Some charts from Miller Samuel updated to include March:

https://www.millersamuel.com/charts/manhattan-inventory-new-leases-and-monthly-absorption/

https://www.millersamuel.com/charts/manhattan-monthly-rental-price-indicators-face-rent/

https://www.millersamuel.com/charts/manhattan-residential-rental-vacancy-rate/

Strangely, no charts on net effective there anymore.

Conspiracy theories, anyone?

This is a kind of interesting move, going from condo to rental, considering the state of the rental market:

The Real Deal: Shifting gears: Brooklyn condo tower to debut as rental.
https://therealdeal.com/2021/05/03/shifting-gears-brooklyn-condo-tower-to-debut-as-rental/

This just went from 2month to 1month free and only 2 vacancies including on their website. Granted it is a very popular location.

https://streeteasy.com/building/the-hilary-gardens

I think the One Boerum Place move says more about the state of the condo market, actually....

Brooklyn is in some ways sui generis, and everything has been kind of flying off the shelves there, but the condo market in general has been kind of slow (and I say this as a listing broker who has one condo in contract in a luxury building, and is negotiating an offer on another).

The dampers on international travel during the Pandemic have been a strong drag on condo sales, and, given the way the vaccination picture is looking, they might not change substantially at a strong pace. So we're in a condo market where many of our traditional buyers aren't playing, and the result, in my eyes, is somewhat flattish pricing. The increasing volume that we're seeing is, in this context, somewhat of a miracle, and it's due, I think, to domestic demand.

That same domestic demand due to "re-opening," which looks to put many butts back in seats over the summer and fall, should hit the rental market stronger. I think the possibility that the rental demand curve starts to slope steeply upward over the next 12 months is fairly high.

ali r.
{upstairs realty}

Interesting points Ali. But I will say we very successfully sold three condos in a luxury condo building in Brooklyn. All had multiple bids after the first open house and all went above the asking price... One of them just went into contract yesterday the other two closed within the last month. We also had to get a big competitive with a deal we just put in the contract at 42 Main Street in Dumbo.

Course all of this is just from my small team so it's certainly not demonstrating any Market trend. But out of curiosity I'll poke around Urbandigs site and see if we can break out Brooklyn new development / condo for some insight into what's going on.

We were the listing agent at 524 Manhattan, represented the buyer at 42 Main Street..

Ali, May happen faster except in ultra-luxury. Goldman wants most people back second half of June. I posted 300 Mercer Street Building example above. Only 2 vacancies there.

"I think the possibility that the rental demand curve starts to slope steeply upward over the next 12 months is fairly high."

https://www.urbandigs.com/dashboa
d

If you click the little gear icon you can switch over to Brooklyn. You can then select new development etc.

New data up through May from Miller Samuel on rents.

After a precipitous drop in April to near-winter lows (data blip?), about 1/3rd of the peak-to-trough losses recovered by May:

https://www.millersamuel.com/files/2021/05/May21MHTrent-conc-scaled.jpg

Meanwhile, listing inventory remains elevated despite a record-setting pace of new leases:

https://www.millersamuel.com/charts/manhattan-inventory-new-leases-and-monthly-absorption/

So lots of churn. I think we are entering the F-U phase of the recovery, when renters who got were not given market-matching renewals last year (and possibly this year) just get up & leave for greener pastures, now that COVID friction of moving has abated. If I were an owner with a tenant who begrudgingly accepted morsels at last year's renewals, I'd proceed with caution rather than smugness at this stage.

inonada, what does "F-U phase of the recovery" mean? who F whom?

I think (some) tenants are going to be F-U to (some) owners.

Last year around this time, the writing was on the wall. People were moving out, inventory had started piling up, and there was softness in new rents. However, under some delusion of "it'll all be over in a couple of months", many owners did not drop rents for existing tenants and instead pursued a strategy of allowing more inventory to pile up. Many tenants simply accepted it, rather than move, because of the extra inertia of the pandemic. Moving is never fun, but imagine getting yourself mentally into a state of "I'll be moving this year" in Apr-May of last year for an Apr-Jul lease.

So these tenants sat w/ no concessions on rent despite their protestations, all the while watching the owner offer rents ~30% lower than theirs in the following months to new tenants with no history of being good tenants, etc. That does not engender goodwill.

Now, the shoe is on the other foot. Sure, market rents are now only ~20% lower than before. And perhaps the owner will offer a ~10% concession, thinking the market is turning soon. A ~10% gap may be close enough in most times to keep a tenant put. However, I posit that the tenants feel particularly screwed. "This owner screwed me last year, he/she is screwing me again this year. Sure, perhaps the owner of the new place at ~20% off will screw me in two years when my renewal comes up. But I know for sure the owner of the current place will screw me. So F-U, I'm outta here."

June numbers from Miller Samuel show price increases into the summer as of June 2021:

https://www.millersamuel.com/files/2021/06/Jun21MHTrent-conc-scaled.jpg

ToReno, are you ready to concede on what you said in the OP in Oct 2020?

>> 4Q doesn't sound like the bottoming of the rental market at all -- i.e. more like 30's prediction, not inonada's.

If anyone’s interested in my thoughts about where we are headed:

https://www.urbandigs.com/forum/index.php?threads/ticker-top-for-1-month-deal-vol.424/post-3309

By now, I think we can all agree last winter was indeed the bottom. But wow, were we ever all wrong about how this winter would turn out. Even I as the “bull” had been saying we’d see a summer surge followed by a winter lull, but the uptrend just never stopped.

https://www.millersamuel.com/files/2021/11/Nov21QNSrent-conc-1-scaled.jpg

https://www.millersamuel.com/files/2021/11/Nov21QNSrent-nlINVmos-scaled.jpg

Prices & inventory are pretty much back to pre-COVID levels. What do people think is going on w.r.t. the level of strength relative to pre-COVID?

Higher volume, lesser prices . Not there yet

Hard to read the M-S charts, but for sake of simplicity let's use Q4-2020 for "Winter" -- if pre-COVID median net effective rates were $3500/mo and Q4-2020 rates were $2800, that's a (20)% decline. If the avg tenant signs for 2 years and gets 4-5 months free, that equates to a (16)% pricing decline [24 months of paid rent / 28.5 months of occupancy]. So I'd say the OP quote was pretty much dead-on, in fact

I do agree with you though that the market has reflated much faster than I'd expected. Personally I think the big landlords are warehousing an unusually large amount of inventory to keep pricing high -- i.e. total $ market rents are still (10)% below [or more] pre-COVID $ market rents. We won't get the data to prove or disprove that theory for a few years though.

Interesting rent increase here.

https://streeteasy.com/building/1-union-square-south-new_york/014m

And this one in a different price segment and location.

https://streeteasy.com/building/parc-coliseum/15h?context%5Bcontroller%5D=%23%3CBuildingController%3A0x000056026a2cc5f0%3E&context%5Bcurrent_user%5D=1004028&hide_if_empty=true&section=rentals

FWIW, I think the Miller Samuel data understates the extent of the drop last year. From what I was seeing, it was closer to these couple of links from
300: a ~35% drop last winter.

I’m finding the increasing prices and inventory situation interesting. According to EQR’s Q3 filing, NYC occupancy is back to normal (~95%) so it doesn’t seem like they are warehousing. OTOH, you can see them sometimes increasing their asking prices to amounts that exceed 2019 materially, with inventory adding up. It kinda feels like they are overshooting they mark.

Take this last link, for example. To get the marginal new tenant last year, it took a price of $2655. I also understand how the marginal new tenant this summer/fall became $3800 or whatever. But with the average tenant currently paying (say) $3000-3500, is there going to be ongoing demand at $4000 as their leases roll off? Perhaps. But looking at EQR listed inventory go from ~1% in the fall to ~5% now doesn’t bode well for ongoing demand at $4000. I am guessing ~5% listed inventory is a good business in normal markets, and that’s how they are pricing. But in the current market, I think continued pricing at $4000 will lead to ~10% inventory and then price cuts. Maybe…

It will certainly be interesting to watch with Omicron delaying RTO further for many. On the other side, people are/will be getting good raises in $200-500k comp range who are typical renters for 1 and 2 bedrooms under 10k in Manhattan.