In June 2020, when Manhattan was reeling from the pandemic and New Yorkers emptied the city in search of more space, Aditi Rao and her two friends found a flex two-bedroom (a makeshift three-bedroom) apartment on the Upper West Side for $3,750.
This month, they decided to renew their lease for $4,950, a 32% increase.
“Right now, the market is just so bad that even if my roommates and I stretch our budgets to the maximum, we would still be getting walkups with insufficient light,” says Rao, 27, who works as an analyst at Columbia University’s Irving Medical Center. “Even two days ago, I opened up one of these rental websites, and it's just getting worse.”
Rao noticed that new tenants signing leases in her building were paying much more.
Manhattan rental prices were always considered stratospheric, but the pandemic brought them back to earth as rents cratered by as much as 20% when a glut of apartments hit the market.
Two years on, rent prices have zoomed past the stratosphere.
“The pandemic rental market recovery has been a rocket ship,” says real estate appraiser Jonathan Miller, who prepares the monthly Douglas Elliman Real Estate report for New York City.
Bidding wars in NYC: Tenants scramble for apartments, rents skyrocket as COVID-19 deals vanish
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The net effective median rent, calculated after accounting for landlord discounts, was $3,870 on new leases signed in April, surging a record 39% year-over-year and up 6% over record-setting March rents. The April median rent was 10% higher than July 2019, which at $3,521, was the highest median rent price on record before the pandemic.
Year-over-year, vacancy rates dropped by 10%, according to the report.
Why are rents surging in NYC?
A confluence of factors is contributing to the surge in rent prices, industry experts say.
Once vaccinations became readily available, young people who were shut out of the market during pricier days took advantage of the COVID-19 discounts and flocked to the city as a vibrant nightlife came roaring back.
Remote workers from across the country took advantage of their ability to work from anywhere to relocate to the Big Apple. By the end of last year, New Yorkers who had left town began returning as things appeared to head back to normal.
Added to all that, surging mortgage rates keep many potential homebuyers as renters longer.
As June approaches, three college graduating classes (2020, 2021 and 2022) will soon descend on Manhattan.
Many of those who graduated during the pandemic in 2020 and 2021 were given the option to work remotely. Now that companies require workers to show up a few days a week, more employees will plan to move closer to work.
The pent-up demand will supercharge the market in June, July and August, months that have historically been the hottest for rentals in Manhattan, Miller says.
“I think it will peak in August,” he says.
A roller coaster of a pandemic rental market
Meimei Cao, a Barnard College student and an incoming investment banking intern at Goldman Sachs, signed a lease on a two-bedroom apartment in the financial district without physically touring it.
She was in Mexico when her friend and would-be roommate heard about the listing from their agent.
“We were lucky that my friend could see it before it was even listed,” says Cao, 23, who viewed the apartment via FaceTime. “We had lost so many apartments within 30 minutes of something going online.”
The pandemic real estate market in Manhattan has been a “roller coaster,” says Marilyn Deamorim, a real estate agent from Next Step Realty, who helped Cao and her friend find the apartment for $5,850 per month.
“It’s just getting worse," she says. "Many people who lived the nomad life because they could work remotely are all coming back now.”
Deamorim says it’s not uncommon for apartments listed for a certain price to go up as she’s in the process of showing them to interested renters.
“This has happened to me a lot where I have appointments booked for an apartment listed for, say $3,600, and then I get an email from the listing agent saying, ‘You can still come and see the apartment, but it’s $400 more than we advertised because we have so much interest,’” Deamorim says.
Rental bidding wars
Bidding wars accounted for more than one in five lease signings and an 11% average premium above the landlord’s last asking price, according to the Elliman report.
Miller says the rental market comeback is remarkable, given that the Manhattan office space is still about two-thirds empty.
“There was an over-emphasis in the belief that being close to work was of paramount importance. Now the reason you're seeing rents rising isn't proximity to work, but it's to be in the city where all the cultural activity is,” Miller says. “Easy transportation, things to do and quality of life are emerging as a significant driver of demand.”
That was the case with Rao.
“I'm a social and outgoing person,” she says. “I am passionate about going to shows and trying out new restaurants. These are things I really truly enjoy. And if I moved away to the suburbs, I wouldn't have those options.”
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here
This article originally appeared on USA TODAY: Three graduating classes compete for NYC apartments, fuel rent surge.