Reopening Market Facilitates Rental Demand Growth;
Capital In-Migration Buoys Recovering Investment
- Multifamily market dynamics return to pre-pandemic levels. While the metro’s job recovery continues at an above national pace, total employment will have yet to surpass the pre-pandemic peak by the end of this year. In contrast to the city’s slower labor recovery, multifamily fundamentals had already returned to pre-2020 values by the end of last year. A general reopening of urban amenities underscored the appeal of living in New York City and brought back some in-person jobs, helping lower vacancy across all building classes to figures comparable to before the health crisis.
- Investment market springs back to life, but room for growth remains. Following surging trade activity throughout 2021, investor demand may dip this year while staying well above health crisis lows. As pent-up buyer fervor dissipates, potential regulatory changes could spark sudden shifts to market behavior. Following measures passed in other cities across the state, New York City is considering a “good cause eviction” policy, introducing among other regulations an effective rent-growth cap of 5 percent.
2022 Market Forecast
- Employment (up 3.5%) – Employers will expand payroll counts by 150,000 positions this year, faster than the national average of 2.5 percent.
- Construction (17,000 units) – Developers will finalize 1,000 fewer units this year than the 18,000 completed throughout 2021. Stock is scheduled to expand by 0.8 percent, the smallest margin in six years.
- Vacancy (up 10 bps) – High renter demand keeps net absorption above the trailing-five-year average as vacancy declines to 2.0 percent due to a combination of returning and new renters entering the market.
- Rent (up 2.2%) – Slower inventory growth and high housing demand keep effective rent growth above the historical market average as rent hits a mean of $2,815 per month in 2022.
- Investment – Class B cap rates could face downward pressure due to renewed investor interest, while regulatory uncertainty may prompt some private investors to seek deals outside New York City.
*Estimate; ** Forecast
Sources: CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc.
Metro-level employment, vacancy and effective rents are year-end figures and are based on the most up-to-date information available as of December 2021. Effective rent is equal to asking rent less concessions. Average prices and cap rates are a function of the age, class and geographic area of the properties trading and therefore may not be representative of the market as a whole. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. Forecasts for employment and apartment data are made during the fourth quarter and represent estimates of future performance. No representation, warranty or guarantee, express or implied may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice.