At the height of the COVID-19 pandemic, landlords in major cities across the country were rolling out the red carpet to attract renters. Faced with a glut of empty apartments amid an urban exodus, landlords in New York City for example, lured renters with things like three months free rent, American Express gift cards, and Citi Bike memberships.
Now, with nearly half of the U.S. population vaccinated and the economy reopening, landlords aren’t feeling as generous. Jonathan Miller, president and CEO of the appraisal firm Miller Samuel, tells Yahoo Finance Live that renters are slowly coming back to large cities and prices are beginning to stabilize.
“One thing that has become very apparent in the last couple of months is the length of leases that tenants are signing is surging,” said Miller. “That's an indication that the tenant believes that rents aren't going to fall any further and it's time to lock into a longer rental term and enjoy the savings for a longer period of time.”
Nearly 60% of those who committed to a lease last month in Manhattan opted for a two-year agreement, according to a new report from Miller Samuel and the real estate firm Douglas Elliman.
The number of vacant apartments in Manhattan rose above 5% in August 2020, to a record 15,025. It was the highest level in the report's 14-year history,
Most New York City rents fell in the first three months of this year to the lowest level in a decade. The StreetEasy Rent Index dropped by 16.8% year-over-year in Manhattan, and rents fell to a new low of $2,700 a month. In comparison, during the first quarter of 2020, just before the pandemic hit, the median asking rent in Manhattan was more than $700 higher at $3,417.
A 'youth renaissance' in the city
The number of new rental leases signed in New York City in May jumped more than fourfold from a year earlier to 9,491, according to the MIller Samuel report. That record number of new leases was led by what Miller calls a “youth renaissance.”
“Rents are still off of pre-COVID levels, but what it's actually doing is it's bringing in a younger cohort into many urban areas where younger people that were priced out are now coming into the city,” he said. “In certain segments of the rental market in New York, we're actually seeing bidding wars on some sought-after type units. I'm not suggesting it's a tight, frenzied market, but we are seeing pockets of behavior that we haven't seen in a long time. So it's quite a shift from last year.”
While inventory in parts of New York City is still about double what it was a year ago, the number of available apartments has fallen for the past two quarters, and is down from the peaks seen during the summer of 2020.
It may still be a renter’s market, but Miller expects activity will pick up more rapidly heading into the fall, as more companies call back their employees to the office. “That will be another big leg up in terms of demand for the rental market, and there will be more certainty of where you're going to be working. It doesn't mean that they're all going to be in the office,” he said.
Miller expects some remote workers will still opt to live in the city.
“There's a narrative that remote work means that you live in the suburbs and work in the city, but that's not really accurate. It's also going to be you're going to work in the city and live in the city,” Miller said. “We’re going to see remote work evolve over the next couple of years.”
Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.