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In March 2020, every New Yorker was feeling the pain of mass lockdowns. It did not take long before over 692,000 people fled New York City for greener pastures, with around 360,000 moving upstate or to another borough, and 333,000 moving out-of-state. The mass desertion of the city took a toll on the housing market and consequently landlords. As we approach the end of the Q2 of 2021, we at MD Squared Property Group want to share with our readers how those numbers are forecasted to affect the second half of the year.

The majority of people are still working from home, but that may change this fall. The New York State Department of Health reported that as of June 7th, about 52.3% of the NYC population is at least partially vaccinated. With numbers like that, landlords and company executives have begun preparing for employees to return to the office. This decision is said to be generating the rise in people moving (back) to the city. On April 29th, Mayor Bill de Blasio announced that the city will be entirely open by July 1st. This has had a positive impact on the multi-family housing market, with more rental and sales inquiries from people looking to move to the city this summer.

Landlords can expect a continued increase in sales and leases executed in the coming months, with leverage to increase prices due to the increase in demand. Forbes writer Shimon Shkury believes that 2021 will be more profitable for landlords in terms of better rent collection and lower vacancies. As for current fair market tenants, expect an increase in rent as you renew your leases….New York City is back! For prospective tenants, act quickly. With more people moving back to the city, prepare for higher price tags and the return of bidding wars. High competition among buyers and renters are making vacant apartments on the market increasingly difficult to find. However, as the demand goes up, so have the expectations of apartment seekers. Many NYC apartments are considered “shoeboxes,” and rightly so, but today’s tenants are looking for more square footage, with room for a home office, an outdoor space, and newly upgraded appliances & fixtures. Some of these requests are out of landlords’ control, but the demand may pressure landlords to consider upgrades and renovations. Experts credit the lack of advertised supply to two causes. They believe landlords are either sitting on vacant apartments until more companies fully return to the office, or the more likely cause, landlords are unable to afford brokers or the fees associated with advertising on StreetEasy.

Everyone is aware of the drastic reduction in the volume of sales and rental transactions in New York City through the first quarter of 2021. However, with a 400% year-over-year increase in contracts as of April 2021, owners throughout the city are feeling a wave of relief. Vacancy rates are down from 6.44% to 5% since Q4 of 2020, and are expected to decrease further as more transactions take place. As of February 2021, we have seen a 112% increase in initial lease executions, the highest rate seen in over a decade. Both the sales and rental market have a surge of interest, whether they are small apartments or larger luxurious units. As offices, NYC public schools, and universities plan to resume in-person meetings this September, The Wall Street Journal experts are expecting to see these numbers climb throughout the summer months.

Over the first quarter of 2021, multi-family sales totaled $620 million from 56 deals across all five boroughs, averaging out to a whopping $11 million each. Townhouse sales are at a record high as 95 recent deals averaged sale prices north of $4 million each. Compared to Q1 2020, Ariel Property Advisors, a real estate consultant in New York City, reported a decline in dollar volume by 58% and transaction volume by 14% in Q1 of 2021. This is likely a result of the pandemic and the 2019 Housing Stability and Tenant Protection Act. However, there has been a gradual increase in transaction volume since the first quarter as residents return to the city, which is an awaited sign of recovery and relief for owners.

For those looking to take advantage of this unique time in New York City real estate by purchasing an investment property, it may be reassuring to know the average capitalization rate has decreased by roughly 0.5% from 2019 to 2021. This reduction indicates a minimized investment risk before the city makes its full comeback. Based on trend forecasts by, we are likely to see the seller’s market move into the city in the coming months owing to the sudden spike in demand for homes in the city.

Exploring New York City’s Latest Real Estate Boom

Back in March of 2020, the air was filled with stress and uncertainty for many landlords as a record number of New York City apartments sat empty on the market while their owners hunkered down elsewhere. Numerous units sold below market value while others were held as unit owners and shareholders kept faith that the city would bounce back sooner rather than later, the latter proving to be true. Average sale prices have increased by a hefty 18.3% year-over-year (NYSAR), and are expected to increase further as housing inventory declines. Housing market reports (NYSAR) for March 2021 show a steady growth in sales over the last seven months in a year-over-year comparison, proving a strong recovery. Landlords who are still looking to sell their units or buildings have chosen to “warehouse,” or deliberately keep a unit or building empty, rather than rent them out in confidence that this demand shift will occur in the near future, allowing them to sell at higher prices. This tactic is not only risky, but it is also expensive. (note: utilizing the tactic of warehousing is illegal under New York law when a building is in the process of converting to a condominium, as very specific procedures must be followed).

Roger K. Lewis from the Washington Post also predicts that a small percentage of commercial buildings will get converted into residential buildings. This is a result of companies making the permanent decision to have their employees work from home, eliminating the need to pay expensive New York City office rent. Although building conversions require a lot of paperwork, rezoning, bureaucratic red tape, and building code constraints, the foreseeable demand for housing in the city could speed up the process.


Putting It All Together

New York City has always been resilient in the face of adversity and there is no doubt this city will show the world a comeback like no other. In the interests of our clients, MD Squared Property Management Company looks forward to watching the vacancy rates decrease throughout the summer months. In the meantime, we kindly encourage you to get vaccinated, wear your mask, and socially distance where it is required.

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