The New York City Economic Tracker: April 24, 2023

The New York City Economy Tracker is a joint project between Investopedia and NY1, using publicly available data to evaluate the economic health of the city across a variety of metrics.

For the week of April 24, 2023, we’re looking into the residential, office, and retail rent markets, analyzing average rent costs and vacancy rates.

NYC Rents Continue to Fall

Yearly changes in median asking rents in almost every borough are still falling as of March 2023, according to data from StreetEasy. The year-over-year increase in median rents in Manhattan was only 10.4% as of March 2023, compared to the high of a 42.8% increase in April 2022. Similarly, yearly changes in Brooklyn and Queens rents are down to a 12.3% and 13.9% increase, respectively. These are below each borough’s 2022 highs of 29% year-over-year increases in July 2022 for Brooklyn and 19% in May 2022 for Queens.

However, year-over-year changes to median asking rents in every borough on the StreetEasy platform are still substantially higher than pre-covid January 2020. The Bronx went from a 2.7% yearly increase to a 6.8% yearly increase since then, while Brooklyn has gone from a 4% year-over-year increase to 12.3%, and Queens rent increases are at 13.9% year-over-year compared to 4.5% in January 2020. 

Although overall median asking rent has declined from the highs of the summer and fall of 2022, prices need to drop more to bring rent cost increase levels back to pre-pandemic trends.

Asking rents refers to the original price a unit is listed for on rental websites, and shows what landlords are asking in the current market. Asking rents tend to be higher than the final cost, as tenants can negotiate the price lower before they sign a lease, and rental costs tend to drop the longer a unit is available on the market. 

Office Rents Still Below 2020 Rates

Unlike residential rents, average asking rents for office spaces in Manhattan are still significantly lower as of the first quarter of 2023 than Q1 of 2020, according to data from Cushman & Wakefield’s Manhattan Office Marketbeat Report.

Specifically, the downtown Manhattan average asking rent of $56.33/sq. ft. as of Q1 2023 is almost 10% lower than Q1 of 2020. This exceeds rent declines in Midtown South which are 1.8% lower since Q1 2020 and Midtown proper office rents, which have actually recovered to $76.95/sq. ft.—slightly above their Q1 2020 average of $76.45/sq. ft.  

The reason behind lower asking rents could be due to lower demand—vacancy rates for offices in Manhattan are still high compared to 2020. In the first quarter of 2023, vacancy rates in downtown Manhattan and Midtown South are still double what they were three years ago. Office vacancies in Downtown Manhattan are 22.6% in Q1 of 2023 compared to 10.6% in 2020, and 22.5% compared to 8.5% for Midtown South. 

The vacancy rate in Midtown is hovering just above 22%, up nearly 10 percentage points from Q1 of 2020. The elevated vacancy rates are continuing to push office rents lower in New York City, especially in the downtown area.

Retail Rents Still Lower Than Pre-Pandemic, Despite Tightening Supply

Similar to office spaces, asking rents for retail units are also substantially lower as of the first quarter of this year compared to three years ago, according to Cushman & Wakefield’s Retail Marketbeat Report.

The $837/sq. ft. average from Cushman & Wakefield’s Manhattan data for Q1 of 2023 was just over 13% below the Q1 2020 average of $963 sq. ft. This decline was driven by rents declining just over 33% in the Times Square area between Broadway & Seventh Ave. and 42nd and 49th street and the Lower Manhattan area by Broadway, Wall, and Fulton Streets. 

Every neighborhood in the Cushman & Wakefield report has lower asking rents now compared to three years ago, except on the Upper East Side by Third Avenue between East 57th and 79th street. This neighborhood had an asking rent of $238/sq. Ft. in Q1 of 2023, over 4% higher than Q1 of 2020.

However, unlike office spaces, retail spaces have not remained largely vacant. Average availability rates in Cushman & Wakefield’s Manhattan data have declined for eight quarters in a row, and are at 19.4% as of Q1 of 2023. That’s over a full percentage power lower than their rate of 21.2% in Q1 of 2020. 

The Times Square area had some of the most significant vacancy declines, with the availability rate dropping from 35.3% in Q1 of 2020, to 19.6% in Q1 of 2023. Every area in Cushman & Wakefield’s data for Manhattan has less availability now compared to three years ago except for the Herald Square and Fifth Avenue, between 42nd and 49th street in Midtown.