NYC Multifamily Overview

The New York City multifamily market in the final quarter of 2023 is characterized by tight vacancy rates, rising rents, and changing dynamics in construction and investment. Here's a summary of the key points from the report:

1. Vacancy Rates: New York City's vacancy rate stands at 2.5%, near historic lows, making it one of the tightest markets in the U.S. This rate is below the long-term historical average of 2.9% and has grown slower than the national average.

2. Supply and Demand: While vacancies remain tight, the supply of apartments has slightly outpaced demand, with 22,000 units delivered compared to 20,000 units absorbed over the past year. The vacancy rate has increased by 0.1% over the last 12 months.

3. Construction: Approximately 65,000 units are under construction, with much of it happening in neighborhoods like Jersey City, Long Island City, and Brooklyn. Developers are also expanding into submarkets in the Bronx and Westchester County due to rising construction costs and competition.

4. Legislative Impact: Recent legislative decisions, such as the end of the 421a tax subsidy, have slowed down construction activity in New York City. This has impacted developers' ability to pursue large-scale market rent unit construction.

5. Rent Growth: Rents have increased by 2.2% over the past year, exceeding the national average of 0.8%. However, the pace of quarterly rent growth has slowed, and some newly delivered buildings are offering concessions, indicating moderating demand.

6. Investment: Investment volume in the multifamily market has slowed in 2023, with transactions on track to be lower than in 2022. Investors are targeting properties in popular Brooklyn and Manhattan neighborhoods.

7. Factors Affecting Investment: Rising borrowing costs, rent deceleration, and the potential for a near-term recession are factors influencing prospective buyers' decisions.

8. Market Diversity: New York's multifamily market shows notable disparities in asking rents, with Manhattan and Brooklyn submarkets commanding higher rents. However, some areas in the Bronx, Queens, and Westchester County offer more affordable options.

9. Concessions: While not common, there has been a slow increase in the number of buildings offering concessions, particularly in newly completed buildings, to stabilize occupancy levels.

10. Economic Recovery: New York City's economic recovery lags behind other major metropolitan areas. While most private sector jobs have been recovered, the unemployment rate remains elevated at 5.4% as of August 2023.

11. Economic Sectors: Job growth is driven by the hospitality and retail sectors, while office-using employment has slowed. Office utilization remains below pre-pandemic levels, impacting businesses in office-centric neighborhoods.

In summary, the New York City multifamily market continues to face high demand and rising rents, but the dynamics of construction and investment are changing due to legislative decisions and economic factors. The market remains diverse, with variations in rent across different submarkets. Economic recovery in the city is ongoing, with some sectors rebounding faster than others.