When the COVID-19 outbreak first hit U.S. soil, New York City was dubbed its epicenter -- a distinction no city wanted. In 2020, Manhattan residents were quick to abandon the city, trading in their cramped apartments for larger homes in the remaining boroughs or nearby suburbs.
Things got so bad for Manhattan landlords at one point that they were forced to offer up concessions like free rent just to get leases signed. But these days, Manhattan's rental market paints a very different picture. In fact, Manhattan rents recently reached a record high for the month of December. And that's putting landlords in a very strong position.
Rents are up -- but will they stay that way?
In December 2021, the average apartment rent in Manhattan reached $4,440, per a report by Douglas Elliman and Miller Samuel. Meanwhile, the net effective median rent (which is the median rent price minus discounts) rose to $3,392. That represents the highest level on record for December and a 21% gain from the previous year.
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A big reason why Manhattan rents are up boils down to demand. When the city was shuttered during the pandemic, there was no reason for residents to pay a premium to live there. But despite challenges from the omicron outbreak, New York City is now open and thriving. Guests can dine at restaurants again. Broadway is open (albeit precariously these days). And concerts and sporting events are back on the schedule.
Not only that, but many companies had been bringing workers back to the office prior to the omicron surge. And while many employers have reverted to remote work temporarily to ride out the current wave of infections, a lot of big-name companies have made it clear that once things improve on the COVID-19 front, workers will be expected to show up to the office. And if that's the case, living in close proximity is worth paying up for.
But while higher rents are clearly a good thing for Manhattan landlords and real estate investors with residential properties in their portfolios, the question remains: How long will they last? If the omicron wave drags on, businesses could end up shuttering, and the appeal of living in one of the most packed cities in the country could wane.
Furthermore, while some employers had brought workers back to the office prior to omicron, others delayed their reopening plans to early 2022 due to the delta variant. These same companies may now be postponing their office returns indefinitely. And that could lead to lower demand for Manhattan rentals.
How the pandemic goes could play a big role
Ultimately, whether Manhattan landlords are able to sustain their higher asking rents may hinge on the trajectory the pandemic takes and whether the omicron outbreak is as short-lived as health experts hope it might be. If the current wave passes fairly quickly, demand for Manhattan rentals could soar, leaving landlords in a very sweet spot. But if the outbreak drags on, Manhattan could see a large exodus similar to the one it was hit with back in the first half of 2020.
