The New York City real estate market is an interwoven network of residential and commercial submarkets. Collectively, this large-scale marketplace offers opportunities for individual buyers and sellers along with institutional investors. M Patrick Carroll, Founder and CEO of real estate development firm CARROLL, believes that these opportunities are becoming illuminated in a post-pandemic real estate market.
Like other real estate markets, the New York City real estate sector was negatively impacted by COVID-19 economic disruptions. However, most market segments are now seeing a measurable recovery.
NYC Real Estate Market Trends
In 2021, the New York City residential real estate market continues to gain momentum following the COVID-19 pandemic. The rental market was more severely impacted. Many tenants left the city, and landlords were compelled to offer up to 20% rent reductions to attract new renters and/or retain existing ones. To attract tenants, some landlords were forced to offer several months of rental concessions.
Now, many employers have begun to recall their workers to the office. Spurred by this promising development, the New York City rental market has begun its own recovery.
Notable Areas of Strength
Downtown real estate markets, such as Soho and Tribeca, are particularly strong. The commercial market is quite robust, as is shown by recent office property sales. In addition, leases have recently been executed for major Soho retail spaces.
The New York City residential real estate market continues to pick up steam. Sales and leasing figures are improving every month.
NYC Buying and Selling Trends
New York City real estate transactions are driven by buyers’ and sellers’ specific motivations and needs. The city’s reputation as a world-class financial and commerce center brings additional nuances into play. With those factors as a backdrop, 2021 buying and selling trends provide a window into this highly competitive market.
Trends in Buyer Behavior
The New York City commercial real estate market is gaining strength. Buyers have recently begun to make strategic acquisitions of retail and office properties.
Trends in Seller Behavior
Multiple long-term owners have recently sold their properties. Some of these transactions may be linked to the potential changes in the tax structure. Other sellers relocated to different geographical areas. For example, certain investment groups wanted to sell their New York City portfolios in preparation for purchasing South Florida properties.
Pandemic’s Impact on NYC Commercial Market
The COVID-19 pandemic had a significant (and lasting) effect on the New York City real estate market. Buyers and sellers at all price points were faced with an unprecedented event that virtually shut down much of the United States’ economy for many months.
Businesses that were allowed to continue operating were faced with many restrictions. The real estate market was not immune to these disruptions.
In 2021, the pandemic appears to be winding down. At the same time, the real estate industry is already planning for the next unexpected disruption. Targeted policies and procedures are currently under development. As real estate operators and investors move forward, CARROLL’s M Patrick Carroll recommends they should develop contingency plans of their own.
The NYC Real Estate Investment Landscape
New York City real estate investments have always been complex endeavors, and that trend continues in 2021. In many cases, a single family has owned the same property for several generations. This greatly limits the availability of marketable properties.
The prominence of rent-controlled buildings, along with other politically charged factors, combine to make New York City a challenging market for most real estate investors. To improve the likelihood of a successful transaction, clients should partner with a real estate investment professional with demonstrated market expertise.
Advice for First-Time Real Estate Investors
First-time real estate investors should exhibit caution when attempting to break into the highly competitive New York City real estate market. New investors should consider the sheer size of this urban marketplace along with the complex issues that do not exist in other markets. These factors make New York City a difficult market to enter. With that caveat, however, this landmark urban center has a cachet all its own.
Short-Term Prediction for NYC Market
The New York City real estate market is expected to show continued growth. During the next six months, the market should further strengthen amid several positive indicators.
Post-Pandemic Real Estate Investment Strategies
As the COVID-19 pandemic continues to decrease in importance, countless businesses and homeowners are regrouping after nationwide economic upheaval. Many companies folded as a result of government-ordered shutdowns. As their revenues dried up, some business owners found themselves unable to pay their business loans.
Thousands of homeowners were also negatively impacted by this pandemic-driven ripple effect. As companies shut their doors indefinitely, workers often struggled to make their mortgage payments. Many homeowners defaulted on their mortgages, and they subsequently lost their homes to foreclosure. It is important to acknowledge the human cost of this pandemic-related economic downturn.
At the same time, however, these distressed assets often presented excellent real estate investment opportunities. For context, CARROLL substantially grew its holdings during 2008’s Great Recession. As market prices dropped, CEO M Patrick Carroll and his company made strategic investments in numerous companies and properties.
The Great Recession vs the Pandemic
From a real estate perspective, however, there is one significant difference between the Great Recession and the Pandemic. The post-Recession migration saw many people moving into urban environments, attracted by the cities’ amenities and conveniences.
In the post-Pandemic era, many home buyers are returning to the suburbs. However, they want to replicate many of the city living perks they left behind. No-maintenance living is high on the list, which increases multifamily rental properties’ values.
Properties that offer walkable amenities and easy access to spacious outdoor areas will be a popular choice. Many single-family homes will likely be available at reduced prices, the result of distressed property sales during/after the pandemic’s economic difficulties.
Commercial Real Estate’s Evolution
Numerous commercial real estate opportunities should also be available. After the pandemic, many consumers may steer clear of mass gathering spots such as shopping malls and movie theaters. As these venues see drastically reduced revenues, they may be good redevelopment candidates.
Attracting Remote-Working Residents is Key
Pandemic-related lockdowns forced many employees to work from their homes. In 2021, a large number of businesses have welcomed workers back into the office. However, many other companies have shifted to a remote workforce to save on rent and other operations expenses.
Single-family and multi-family real estate developers should make every effort to accommodate these remote-working residents in their communities. In addition, developers and property managers should understand the residents’ quality-of-life needs that will cause them to choose one community over another. Communities should make these remote worker-friendly amenities an integral part of their marketing programs.
Smaller Living Spaces
Many remote workers are younger, and they may be single or married without children. These workers often value convenience, and they want to avoid large homes that require extensive upkeep.
Studio apartments, along with one-, two-, and three-bedroom units will appeal to this demographic. Smaller single-family homes may also be a good fit for workers who appreciate comfort but are accustomed to small-space urban living.
Pandemic-era workers often became quite creative when carving out home-based workspaces. Dining room and kitchen tables were common work platforms, although living room couches and beds were also pressed into service.
In the long term, however, remote workers need dedicated workspaces that offer the technology found in a modern office. Some communities have business centers, although they do not always offer privacy and may not be available when needed. Therefore, a dedicated in-home workspace is the preferred solution.
Integrated Wi-Fi Service
Remote-working employees depend on reliable Internet service to communicate with clients and coworkers. Wired and wireless connectivity is essential, and many newer homes and apartments already feature this built-in capability. Employees who want a change of scenery may visit similarly equipped community clubhouses.
Reliable Cellular Reception
Dependable smartphone service has also become an essential business tool. Every part of the home should have adequate cellular reception, which helps to prevent dropped calls that often impact business operations.
Relaxed Pet Policies
Many remote workers value a pet’s companionship, and they want to live in a community in which pets are welcome. Housing development and multifamily property managers should consider relaxing pet restrictions to attract more buyers and tenants.
Communities should also consider adding onsite dog parks, natural outdoor spaces, and playgrounds. These areas will enable remote workers to take breaks with pets and children throughout the workday.
Flexible Leasing Policies
Multifamily property managers should consider offering flexible leases to their tenants. Properties willing to accommodate sudden disruptions to tenants’ lives will likely attract more tenants over time.
As the United States real estate market continues its recovery, astute real estate investors will continue to find opportunities in often-unconventional places. With clear goals in mind, and a firm capital foundation on which to pursue them, there is reason for optimism on the path forward.
CARROLL is one of the United States’ premiere real estate investment companies. Founded in 1994, by M Patrick Carroll, Atlanta-based CARROLL has consistently experienced impressive growth even during challenging business climates.
Currently, CARROLL holds over $5 billion in managed assets and owns over 30,000 residential and commercial properties along the United States’ East Coast. In addition, the Company has developed over $200 million in properties on behalf of its institutional partners, principals, and private investors.
To fund its successful investments, CARROLL raises private capital from top-tier institutional investors across the globe. This structure enables CARROLL to pursue its business goals without shareholder or Board of Directors constraints.
CARROLL’s private capitalization also positions the firm to employ out-of-the-box approaches to its real estate investments. When emerging trends draw concentrated market interest, CARROLL identifies (and pursues) opportunities in those areas left behind. The Company also uses its substantial in-house resources to find the value in undervalued and underperforming properties.