December 2020 report
We would like to conclude this eventful 2020 with a short year-end report from New York City. New York State learned a lot since the onslaught of last spring’s tragic situation and imitated, as much as possible, the best practices of Asian countries where the pandemic is largely under control.
With VPM NYC we followed the trend of over 100 residences in a multitude of districts across Manhattan, Brooklyn and the Bronx. In the past 8 months we have seen:
• A very resilient Bronx with minimal concessions required by renters. Generally speaking, these are essential workers who do not telework and whose rent is still lower than that of other neighborhoods.
• Manhattan in general has seen vacancies fivefold to unprecedented levels in the last two years. The effect is more pronounced in neighborhoods where the tertiary sector is predominant. In Midtown and the Wall Street area the combined effect of lock-down and teleworking produced a true 'Ghost Town' effect with closed shops, deserted streets, and empty offices; additionally, hotels have seen what in 2019 was subject to a 65 million arrivals pause with zero flow of tourists.
In the more affluent neighborhoods, there has been a tremendous exodus to the Hamptons, NY and Greenwich, Connecticut.
The effects of the pandemic crisis have been lethal for new luxury real estate developments, which were already in great difficulty before the crisis and today many are in danger of bankruptcy.
• In Brooklyn, rental prices remained largely pre-covid prices except in more expensive neighborhoods such as Dumbo, which faced competition from lower Manhattan prices. We note that sales remain sustained at pre-covid values and even some small buildings in 'up and coming' areas are, much to the surprise of the brokers, sold on paper in pre-construction. This phenomenon confirms that the phoenix is ready to take off again and that New York City will soon rise stronger than before, as it did after 9/11 and after the 2008 Lehman economic crisis.
Starting December 15th, NYC began receiving the first doses of the Pfizer vaccine and, once the uncertainty of the elections has passed, this will be the second stage of recovery. We believe this will mimic our correct prediction during the 2008 crisis at the end of the Bush presidency, when we knew recovery would become visible starting in February, immediately after Obama's inauguration.
This is a very different crisis, a non-financial crisis, but nonetheless, a crisis that will certainly benefit the most socially responsible societies, such as those in Asia that have been able to adopt through surgical lockdowns, and the more technically organized ones like in the US and Germany where vaccine production will be faster and more efficient.
Our forecast: the minimum in terms of property values will be reached precisely in this period between mid-December and the end of February (when the transition of the new management will be completed), and in the spring we expect clear signs of recovery values. This is a good time to aggressively return to the market for those who have taken a pause for reflection.