Here’s where NYC real estate stands post Labor Day

Pulled a Rip Van Winkle? The essential industry news you need to get you up to speed

State of New York Real Estate Post Labor Day 2020
The essential guide to where the New York real estate market stands on investment sales, leasing, residential and politics. (iStock)

Back to school still a question mark

The New York City school system, the nation’s largest, is officially back in action on Sept. 21. Nearly 40 percent of parents, however, have chosen to have their children learn remotely for the first few months of the school year, the New York Times reported. Families opting for remote learning tend to be more prosperous, and so their decision to stay out of school — and perhaps remain out of the city — could further dent an already depressed rental market.

“It’s not just going to open floodgates,” Douglas Elliman’s head of rentals Hal Gavzie said of school reopening’s ability to bring New Yorkers back to the city.

And it’s not just public schools. Success Academy, the city’s largest charter school network, is staying fully remote until at least December.

Evictions are a no-go. So are tax lien sales

Multifamily landlords were dealt a wallop by the CDC last week, when the federal agency issued a new order banning most residential evictions through December. Landlords and their representatives have already argued that state and federal governments have provided little relief for them in the wake of the pandemic. This latest move, they say, could push them over the brink.

“You’re leaving the most crucial industry except food out in the cold,” said Jaime Cain, a real estate attorney.

Tenant advocates, however, argue the measure doesn’t go far enough.

“What exactly do you think is going to happen January 1?” said the Legal Aid Society’s Ellen Davidson. “It can’t be that as of January 2, everyone gets evicted.”

Meanwhile, the city’s annual tax lien sale was once again postponed, providing homeowners and landlords behind on their tax payments a reprieve.

The city’s Department of Finance administers the sale, selling the owners’ outstanding debt to a nonprofit trust that can eventually assume control of the property. Officials decided to push it off due to pandemic-related financial strains. But when is it now slated for? The governor says Oct. 4; the city says Sept. 25.

Office leasing doldrums

The office as a beacon of creativity! Of innovation! Of patriotic duty! Tenants are yet to buy any of those arguments.

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Manhattan office availability rates hit a seven-year high in August, Colliers data show, with leasing volume down 21 percent year-over-year. Facebook’s consummation of its megadeal at Vornado’s Farley Building was a big boost for the market, but as more companies opt for full or partial remote work, expect sublet space to become migraines for landlords.

Investment snails

New York investment sales volume from January through June totaled $9.65 billion — a drop of 45 percent compared to the second half of 2019, according to Ariel Property Advisors. And those numbers include deals that went into contract before the pandemic fully took hold in the city, so the true health of the market may be even more dire.

Overall, the U.S., which has been among the developed nations hardest hit by the pandemic, has seen its investment sales plummet more than most other major markets. The Americas region saw deal volume fall to $43 billion in the second quarter, a 70 percent year-over-year drop from $141 billion, according to CBRE. Hotel deals fell off a cliff, but office, multifamily and industrial sectors also took big hits.

Retail details

New York City malls are reopening Sept. 9. The five boroughs are home to about two dozen malls, a paltry number relative to the city’s population. The comeback, however, comes with strict rules, including no food courts, no hanging out, and no “loitering.”

Related CEO Jeff Blau said late last month that the developer was collecting just about 50 percent of its rents at its Manhattan malls (Hudson Yards, touted as the “future of retail,” is most definitely a mall). Related has taken major hits at Hudson Yards, including losing key tenant Neiman Marcus and showpiece eatery TAK Room. Other malls are also struggling, with Manhattan Mall losing JC Penney to bankruptcy and Empire Outlets in Staten Island unable to make debt payments.

More broadly in retail, observers are expecting a wave of defaults this fall and winter as landlords who worked with retailers on rent relief run out of options – and their lenders run out of patience.

First, we take Manhattan

Contracts for condos in Manhattan fell almost 38 percent year-over-year in August, according to Miller Samuel data, while new listings went up 30 percent. Co-op contracts fell 26 percent. The ultra-luxe market was basically on ice. Brooklyn, however, had another rollicking month: Modestly-priced co-op deals saw a big spike, as did condos.

Deals in Brooklyn have mostly followed the upward trajectory of the suburbs. Co-op deals climbed 181 percent last month to a total of 138, the report showed. Most of them were in the $500,000 to $999,000 range, followed by the second-largest bracket, under $500,000. There were zero co-op deals above $4 million.

Meanwhile, out East

Labor Day is usually the last hurrah for the Hamptons, with the Bobby Vans set packing up their white pants and booking their Blades back into the city. This year, however, the Hamptons promises to be a year-round destination. Summer hotspot eateries are planning to stay open for at least a couple more months. Families that have opted in for remote learning for their children are extending their rentals and scrambling to buy. Contracts for single-family homes on the South Fork climbed 109 percent year-over-year in August.

“No matter where you go nowadays,” said Town & Country’s Judi Desiderio, “people are saying there’s going to be no tumbleweed Tuesday.”

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