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Category: Industrial, Multifamily, Net Lease Retail, Report Tags: hospitality, New York

How is New York Performing?

New York City’s commercial real estate climate is heavily reliant on in-office workers, tourism, and consumers returning to urban core environments. With the boost of the city’s $30 million “NYC Awakens” campaign to signal the city is open and ready for tourists after the pandemic, New York is on its way back to normal. Its office industry is a key driver of mid-week hotel occupancy, and the return of working environments back to in-person is crucial for this segment’s long-term health. As of late January 2023, 52 percent of Manhattan office workers are at their offices on a weekday, a rise from 49 percent in September, according to the Partnership for New York City. With more people returning to the office, New York’s retail sector is recovering due to the increased foot traffic. Additionally, since the start of 2021, people are moving back into the city, increasing multifamily demand and lowering vacancy rates to just 2.4 percent, a near-record low. All in all, New York is on the mend.



Apartment demand in New York has remained robust since the start of 2021, aided by continued hiring and the gradual return of in-person office work. Vacancies remain tight at 2.4 percent, despite an active supply pipeline that has seen over 60,000 units in the past two years and 64,000 units underway in Q1 2023. The highest occupancies are in 1- and 2-star units, as well as 3-star units. Investors are enticed by rising occupancies and rents, in addition to $11.8 billion in sales volume in 2022. The average sale price per unit was $404,000, with an average property sale price of $10.2 million, showcasing the high demand for New York. Year-over-year rent growth is at 2.8 percent for Q1 2023.


Development is widespread, but a majority of new construction can be seen in Brooklyn, Long Island City, and Jersey City; areas where a supply wave is possible due to a mixture of robust demand and available land. These submarkets offer both space, easy public transportation into Manhattan, and affordable costs. A recent notable submarket sale was by Harbor Group purchasing the Vista at Town Green, a community in Elmsford consisting of 617 units, for $306 million. The property offered a strategic location between several employment centers and transportation options. In the future, New York is anticipated to hold vacancies tight and sustain rent growth, luring in investors.



Hotel occupancy in New York is driven by travelers coming into the city for work and/or meetings. As business travel recovers and inbound international leisure travel increases, weekday hotel demand is anticipated to pick up. There has been an influx of new hotels, primarily in the luxury and upper-scale supply pipeline. The market has added over 7,700 rooms in the past 16 months, a seven percent increase in inventory. Given the recent positive trends, market RevPAR is forecast to recover to 107 percent of 2019 levels by 2023, according to CoStar Group.


Forty-six hotels across New York, boasting over 10,000 rooms have not reopened since the pandemic. Therefore, a new trend in hospitality is converting old hotels into mixed-use spaces, which will help mitigate the impact of new supply. An example of this is The Hudson Hotel in Midtown, which boasts 866 rooms, recently sold and will be converted to a mixed-use development with 438 residential units, office, and commercial retail space.



New York’s retail vacancy rate stands at 4.1 percent, on par with its long-term historical average and the U.S. average. In the city, the competition for highly visible storefronts in prime shopping corridors like SoHo and Greenwich Village has intensified, creating a spillover effect, with demand spreading into areas nearby. Overall retail rents throughout the metro have grown by 1.4 percent in 2022.


Rents in New York vary depending on location, with the highest rents seen in high foot traffic areas, like Times Square, which sees $800 per square foot. Outside corridors of Manhattan typically range from $100 per square foot to $300 per square foot. In the outer boroughs, the most expensive rents are found in Brooklyn, ranging between $40 and $100 per square foot.



The New York metro has seen a heavy pipeline to meet demand for well-located efficient distribution facilities. Since the start of 2020, over 30 million square feet of projects have broken ground. Transaction activity is strong, with more than $7.5 billion of industrial property trading hands in 2021 and $6.9 billion in sales in 2022.


New York’s MSA is seeing occupancies near all-time highs, putting owners in positions to increase rents to take advantage of this historically supply-constrained market. Rents have increased by 9.1 percent.


Wrapping Up

New York City’s retail, industrial, and hospitality sectors have steadily improved over the past year as travelers and businesses return to visit. In 2022, more than 56 million visitors traveled to New York City, according to New York & Company. 2023 is anticipated to see 61 million visitors. Hotel weekday occupancy has improved over the past 12 months as more New Yorkers travel and enjoy leisure activities. However, industrial is anticipated to pick up in areas closer to the city, as consumers prefer same-day delivery, increasing the need for last mile warehouses. With a younger generation entering the workforce in-person working levels are expected to increase. With that, the multifamily sector is anticipated to see pre-pandemic growth levels as consumers return to or move into Manhattan. Overall, New York’s market is recovering steadily and posting strong fundamentals.

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