Manhattan rents have been slashed more during the pandemic than during the Great Recession — and have even farther to fall

  • Rents in Manhattan dropped 12.7% year-over-year in November, a bigger rent dip than during the Great Recession, 2008 to 2010, according to an index published this week by real-estate listings site StreetEasy
  • In addition, Brooklyn and Queens both saw record year-over-year rent drops. 
  • StreetEasy economist Nancy Wu told Business Insider that she expects New York City's rent prices will continue to fall over the coming months, but vaccine distribution and warmer weather could mean a reprieve for the struggling sector in 2021.
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For once, the rent isn't too darn high.

Since the onset of the coronavirus pandemic, the New York City rental-apartment market has been rocked by falling prices and rising vacancy rates. The jolt follows a mass exodus of Big Apple residents to the suburbs, hometowns, vacation-home hotspots, warm-weather retreats and other less-dense locales. 

A report released this week by real-estate listings website StreetEasy paints a grim picture. The popular property portal found that rents in the Manhattan have decreased more during the pandemic than during the Great Recession of 2008 to 2010, the last major economic downturn.

Rents in Manhattan dropped 12.7% year-over-year last month, according to StreetEasy's rent index. The median asking rent in November was $2,800 per month — a 10-year low.

Put that dip into perspective: From 2008 to 2009, when the collapse of financial powerhouses Lehman Brothers and Bear Stearns kickstarted a ripple effect through the economy, Manhattan rents fell 9.4%. Another significant drop came March 2010, 18 months after the Lehman's collapse, when the lowest-price rentals in Manhattan saw an 11% year-over-year drop, middle-tier units saw a 10% year-over-year decline, and luxury apartments saw a 9% year-over-year decrease. 

"We expected the rental market to match the weakness seen during the Great Recession, but the fact that the market has surpassed that level in less than one year shows how serious the crisis caused by the pandemic has been," StreetEasy economist Nancy Wu said. 

Brooklyn and Queens, two boroughs that typically have active rental markets, recorded major price cuts.

November rents in Brooklyn fell 6.3% year over year, and the median asking rent was $2,400. In Queens. rents dipped 5.7% year over year, and the median asking rent was $2,100. Per StreetEasy, those marked record drops for both boroughs.

Contributing to the rent decline is the sheer number of apartments sitting empty. Vacancies remained high across the board in November, with a recorded 37,000 empty units in the city, more than double the amount during the same time last year. The glut in supply, coupled with the lack of demand due to the diminished population, is the main force pushing NYC rents down.

How long will NYC rents stay this low?

Wu told Business Insider that she doesn't foresee rents bouncing back in 2021. A full correction back to pre-pandemic prices, she added, could take years.

In fact, as the city hurtles through the colder months, Wu said expects rents to fall even lower.

But widespread distribution vaccine, which started being administered in mid-December, will help draw residents back to the Big Apple. Also, warmer weather tends to boost interest in moving to the city — and moving in general — which could start to push prices back up in the spring. 

"The rollout of COVID-19 vaccines and plenty of great rental deals will be the catalyst for many to return to the city," she said. "But we're still a long way from the city's return to normal."

For New York City rents to fully recover, the math is simple: The number of inbound renters will have to exceed the number of outbound renters. That would increase demand for rental apartments, and therefore boost prices.

But a surge in inbound renters is far from a guarantee, especially in the near term. One obstacle is the fundamental change that the pandemic has brought to the labor market. The mere fact that employees of many major companies can work remotely indefinitely is likely to change the cost-of-living and quality-of-life calculus for many former Manhattan residents.

Manhattan landlords, for their part, will have to adjust to a new normal.

Yes, the ability to work from anywhere has given renters the option to relocate to new places out of the city. But that shift in corporate expectations has effectively put Manhattan, notorious for its high real-estate price tags, on the same footing as the outer boroughs of Queens and Brooklyn.

When living near the office or having a manageable commute isn't a priority, renters cast a wider net for homes and end up with more affordable pads farther from the city center.

As a result, the formerly dense heart of the Big Apple, which is one of the world's most expensive rental markets, could lose some of its luster — even after the worst of the pandemic is over. Its recovery will be heavily influenced by a variety of factors, including the city's unemployment rate, whether or not employees need to return to brick-and-mortar offices (and when), and how soon the city's arts, culture, sports, and entertainment options return.

There's at least one bright spot.

Added Wu, "New York City, especially Manhattan, is going to become accessible to a much wider range of incomes than it was in the past."

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