Sydney Harvey didn't plan on living in the penthouse of her Washington, D.C., apartment within a year of graduating from university, but due to the nature of the rental market and hefty concessions she and her boyfriend were offered last year, she couldn't resist the opportunity.
Harvey was told that if she signed a lease within five days of touring the unit―a one bedroom located in the bustling Navy Yard area―she wouldn't have to pay for the latter half of the month and she'd get three months of rent free. The building also waived the amenities fee, the moving-in fee, and upgraded the couple to the penthouse free of charge. And, on top of that, offered Harvey $900 off the base rent. "To be straight out of college living in the penthouse is unreal," the 23-year-old says.
As result of the fluctuating rental market caused by the pandemic, many renters took advantage of lower rates and a range of concessions over the past year and a half. New York City, onetime epicenter of the pandemic, witnessed some of the highest shares of concessions in the country.
Nancy Wu, an economist for StreetEasy, noticed that concessions started to spike in NYC from March 2020 through the end of the year. At one point, nearly half of rentals in Manhattan had a concession associated with them, she says. In September 2020, there were about 48,753 available units in New York City―the peak of vacant units in the pandemic thus far, according to StreetEasy.
"Forty-three percent of rentals in Manhattan had a concession at the end of Q4, and it's been pretty high throughout the spring as well," Wu explains. "It was in the summer where concessions dropped considerably."
Anna Hodges moved from Austin, TX, to the Financial District of Manhattan in May of 2021 for her new job. Hodges was enticed by the great deals she saw on StreetEasy and advertised on social media. Though her job hadn't yet required her to be in person yet, she said that "the concessions definitely were a big reason" of why she moved sooner.
Like Harvey, Hodges acknowledged that she would not have likely afforded her luxury apartment pre-pandemic. "When I hear what they're charging now or even in pre-COVID times, I'm like 'oh my God, I got such a deal!' I know some people with studios in my building paying $2,800―that's already almost $400 more than I'm paying―and we're still in the pandemic," Hodges says.
Hodges is already thinking about what may happen when her lease expires in six months. "I love my little studio, but there's no way I'll be able to afford it when my lease is over," she says. "I really like my building, so either my boyfriend and I will move in together, or I sadly will need to find a new place to live, but I'm definitely already worried about it and I still have over a half a year to go."
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Indeed, as the rental market swings back to a competitive one—with prospective leasees even outbidding each other for apartments—residents of buildings that made use of concessions which have since been revoked will face some hard decisions.
"All of these great deals last year where people got to live in some incredible buildings because they got anywhere from one to four or five months free that we've seen, now they're faced with lease renewals at a much higher growth rent," says Wu.
"Now it's about trade-offs. Do they want all the amenities for that price, or would they be okay taking on a roommate or moving somewhere else? That's always been the trade-off that New Yorkers have had to face," Wu explains.
The rental market is quickly picking up in many of the cities that saw such seem-too-good-to-be-true deals. Ray Amouzandeh, the principal broker at TARGA Residential Brokerage Inc., works closely with landlords seeking short and long-term tenants in San Francisco. He stressed that the time for making details with tenants seems to be approaching its end.
"The only concessions that I mostly see is that if the lease is coming up for renewal and it already has not been discounted—because 80-90 percent of tenants did ask for a discount— chances are they will get a 10 percent discount," he says.
Amouzandeh added that a potential concern for tenants in San Francisco is the influx renters who will return to the city once companies, particularly in the tech industry, start enforcing their return to office or hybrid policies. "When that happens, I can see that the rates―the most expensive rentals in the U.S. right now―will be even more expensive," he posits.
Sean Welch, who moved from Stamford, CT, to Hell's Kitchen with his girlfriend this October, said that he encountered landlords still offering some concessions, such as one month free and reduced security deposits. But instead of taking one of these potentially temporary deals, he opted for an apartment that was full price but rent stabilized.
"They [the concessions] were nice to have when we were looking, however we looked for an October 1st move in and we did not get any concessions―we had to pay a full 15% brokers fee," he says. "I secured a rent stabilized apartment unit, though, so we should not have any crazy high rent increase next year."
Andrew Barrocas, CEO of MNS Real Estate, a residential brokerage firm in New York, said that data from the firm's recent September report reveals that the market has come back stronger than he'd anticipated.
"My prediction was in 2020, right after the market dropped during COVID, that the market would be fully recovered by the summer of 2021. The report basically show that it was actually ahead of where we predicted it to be. In certain instances, it actually went up," he says.
Wu says that inventory, which has returned to pre-pandemic levels, will continue to drop as more companies reopen its offices. However, she expects the inventory to not drop as rapidly as the summer months. Typically the winter, she says, is a slow season for renters.
"I do anticipate to see inventory dropping less rapidly throughout the rest of the year, but it's still going to be dropping because we are still seeing that more companies are announcing reopening in November or early 2022," she adds. "That's going to push back on people's timelines for when they're moving back to the city and when more and more people move back."
With these workers returning to metro areas, the days of widespread discount rent will likely be a thing of the past.
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