New York City: The State of Play

Hot off the wires, here is some information about the current exodus out of New York State. We note, as some commenters remarked yesterday, that many people from many states around the country would prefer that New Yorkers stay where they are.

The New York Times reports on the apartment rental crisis. More apartments are now vacant. More landlords are decreasing the rent. 

Here is the Times data:

There were more than 67,300 units available in July across the city, according to StreetEasy, the most apartments available in any month since the listing site started tracking rental inventory in 2010.

In June and July combined, more than 120,000 apartments were for lease, a nearly 26 percent increase over the same months in 2019.

The surge in supply has driven down rental costs across the city and forced landlords to offer generous concessions, including up to three months’ free rent and paying the expensive fees brokers command.

The spike in available units has been most stark in Manhattan, where office towers are mostly empty, residents with second homes have largely not returned, and many retail stores are closed or have gone out of business.

The median rental price there in July was $3,167, a 10 percent drop from July 2019, though New York still has some of the highest rental rates in the world.

The vacancy rate in Manhattan climbed to 4.3 percent in July, the highest percentage in at least 14 years and surpassing past records set in June and May, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.

As for commercial real estate, the Wall Street Journal takes a look at the situation at the iconic tower called the Empire State Building. Over on 34th Street things are not looking so good.

The Empire State Building, New York’s most famous office skyscraper, has come to reflect much of what ails the city and its commercial real estate during the Covid-19 pandemic.

The iconic tower looks vulnerable to losing office tenants as more companies embrace remote work or cheaper satellite offices outside city centers. Some in the industry say it is worse off than many peers because the building relies on smaller office tenants, which tend to be more at risk during a downturn. Its retail tenants face challenges with many of the building’s employees not back to work. Tourism, a major source of revenue, has all but dried up.

And finally, Joshua Chaffin in the Financial Times (no link available) reports from the Connecticut suburbs. He addresses the question of whether companies will follow workers by relocating to areas outside of the city.

Whereas the city was previously a highly desirable place to work and to live, such is no longer the case.

But coronavirus has, almost overnight, thrown this dynamic into question by rendering some of these cities’ great attributes — their density and cultural offerings — unappealing or off limits. That is prompting an exodus to suburbs that had wilted in their shadows.

Real estate brokers in Connecticut are seeing their business expand exponentially:

“It’s unlike anything I’ve seen and I’ve been doing this for 20 years,” says Carolyn Fugere, a Sotheby’s broker in Stamford. In July, the number of single-family homes under contract in the wider Fairfield County rose 63 per cent compared to the previous year. The value of those contracts was up 104 per cent. Reports of rising crime in a fraying New York City, Ms Fugere adds, are prompting young families to “accelerate life decisions”.

How many families are leaving New York?

On the other side of the ledger, Real-Page, a property analytics company, recorded a net loss of 6,786 households in the New York metro area in the second quarter. It had gained 3,730 in the same period a year earlier. (Los Angeles lost 6,347). The flight has been so dramatic that Governor Andrew Cuomo recently pleaded for New Yorkers to come home.

“We’ve already picked up data that it’s happening,” says Jacques Gordon, global strategist for LaSalle Investment Management, noting that the property firm was seeing similar shifts outside London and Paris. “The bigger question”, Mr Gordon asks, “is whether it’s permanent or temporary”.

For my part, I am guessing that it's permanent. So said James Altucher the other day, and I suspect, with him, that the declining quality of life, the increased incidence of crime, the degraded school system, has persuaded people to pick up and leave.

Optimists will claim that a new mayor will set the city right. But then again, the people who vote for AOC are not likely, in the long run, to vote for a mayor capable of setting the city right.