It’s no secret that rents in New York City are falling, but a new report predicts that they could fall much farther over the next year, prompted by a combination of job losses and rising inventory.
Manhattan rents declined more than 3% last month, the largest year-over-year drop since the Great Recession, when rents in Manhattan fell nearly 10% over the course of a year, according to a report by listing site StreetEasy. During July, total rental inventory was 52% higher than last year.
The Zillow-owned site recently predicted that the city’s rents would fall by at least that much, if not more, by next March.
The economic impact of the pandemic is already worse than what New Yorkers faced in 2008 and 2009, said StreetEasy economist Nancy Wu. New York City’s unemployment rate rose from 18.3% in May to 20.4% in June 2020, according to the Bureau of Labor Statistics, which is twice as high as the Great Recession’s peak unemployment rate of 10.4% in December 2009.
At least 520,000 jobs have already been lost from the small business sector alone, according to data from the Partnership for New York City referenced in the report.
“High unemployment leads to higher vacancy rates, as the New Yorkers who can no longer afford to live in the city or who moved to the city for work increasingly move away,” Wu wrote in the report. “Higher vacancy rates translate into lower demand for the rental inventory piling onto the market as leases expire throughout the summer. As demand continues to decrease while supply increases — and there are many reasons to believe these trends will continue — rents are likely to fall more than they did during the Great Recession.”
Summer is peak time for expired leases, and the market has already been flooded by inventory. Rental inventory increased last month in Manhattan by 65% and citywide by 52% compared to the same time last year.
“Many more rentals are set to pile onto the market throughout the summer, as August is typically the month with the second-highest volume of rentals coming onto the market, after July,” Wu wrote.
The citywide rental report released today by Douglas Elliman Real Estate, compiled by real estate appraisal form Miller Samuel, seemed to reflect this, showing that last month saw a new record Manhattan vacancy in 14 years of recording.
The rental market will also be compounded by city residents who are taking the opportunity to move to the suburbs and, unlike before, they won’t be replaced by new hires or students, who will be able to work remotely.
“New York’s rentals market will not return to normal for the foreseeable future, and those considering moving or who have expiring leases will need to make decisions they did not anticipate a year ago,” Wu wrote. “For the lucky few who have jobs, there are going to be deals like never before. Manhattan neighborhoods that were off limits to those on more modest budgets may once again become accessible.”