Flash Survey on COVID-19’s Effect on NYC Real Estate
- More than one-third of NYC real estate professionals experienced complete shutdown
- 60%+ of residential professionals saw deals postponed and new business decline
- Commercial sellers in NYC more hesitant to remove listings from market
- One in five real estate professionals expects the pandemic to affect business activities into 2021
- Self-storage considered safest commercial asset type
- Residential professionals expect surge in interest for homes with dedicated workspaces and private outdoor space
It’s a time of uncertainty, upheaval and wildly varying experiences for real estate professionals operating in both the residential and commercial sectors. So, we reached out to NYC-based professionals to see how they’re experiencing the situation on the ground, how they’re adapting and planning for the future, and where they see opportunities emerging.
More Than One-Third of NYC’s Real Estate Professionals Experienced Complete Shutdown
The influence of the pandemic is widespread. So much so, that only 8% of respondents from the commercial real estate industry reported being minimally affected or not at all affected by COVID-19. On the residential side, the effects have been even harsher, with only 3% of those surveyed reporting few or no disruptions. Overall, about one-third of respondents reported being completely shut down — 32% of residential and 36% of commercial professionals were not operational.
However, as with many industries, most of the city’s real estate professionals have rallied under the necessary lockdown measures: 55% of commercial respondents experienced significant disruptions but adapted to stay mostly or partially open, with 65% of their peers on the residential side in the same situation.
Decline in New Business, Deals Postponed & Payments Delayed
Residential real estate professionals in NYC seem to have been affected to a higher degree than commercial real estate professionals in deal-making. For instance, 66% of residential professionals reported declines in new business and 64% saw deals postponed, compared to 53% and 48%, respectively, of commercial professionals.
Furthermore, 40% of residential professionals have had buyers pull out of deals and 33% have had showings canceled due to the pandemic. In the commercial sector, respondents noted similar levels of buyers backing out of deals and showings — 43% and 31%, respectively.
However, there was a noticeable difference among NYC sellers. While 37% of residential professionals said sellers removed properties from the market, commercial sellers seemed more resilient to the choppy economic landscape. Only 24% of commercial professionals said sellers pulled their assets from the market.
Likewise, the city’s commercial segment also experienced a slightly higher increase in online operations — such as online showings, negotiations or contract signings. In this area, 27% reported increased demand, as opposed to 23% of residential professionals.
Overall, more than 70% of professionals — regardless of industry — were affected by government office closures or government-mandated shutdowns, and more than one in three professionals have noticed issues with delayed payments.
As for how long COVID-19 will influence local real estate professionals, 58% expect the pandemic to run its course this year, while roughly one in five expects it to affect their professional activity into 2021. A small percentage anticipates that the global health crisis will still have a direct effect on their business into 2022. And, one in six respondents said they were taking a wait-and-see approach, refraining from predictions or estimations.
Economic Environment & Consumer Behavior to Define Industry Beyond COVID-19
Looking beyond the health crisis, local real estate professionals agree that the economic environment and consumer behavior will be the two greatest influencers of the 2020 real estate market and beyond. In fact, 71% of residential professionals and 64% of commercials professionals named the economic environment as a key element in the industry’s performance. It was followed by consumer behavior, according to 58% and 57%, respectively.
What’s more, nearly half of respondents reported that the political environment and shifts in spending habits as a result of the crisis would also have a significant influence on the real estate market’s performance, while about 40% consider the stock market’s performance a key factor.
Construction and delivery delays as result of global supply chain disruptions are also expected to be a noticeable factor. Here, commercial professionals are more concerned than those in the residential sector. Specifically, 58% of residential professionals considered the global supply chain to be influential or very influential, as compared to 69% of commercial professionals who expressed the same opinion.
Retail Faces Uncertainty, Self-Storage Considered Safest Asset Type
Undeniably, the hospitality industry has taken a beating from the health crisis and the resulting widespread social distancing and lockdown measures. But, it’s not the only asset type affected by the pandemic. In fact, 70% of commercial real estate professionals named retail and coworking as the most affected commercial real estate sectors other than hospitality.
Specifically, 38% of professionals consider retail to be the most affected commercial asset type and 22% expect it to be the last to recover. Meanwhile, a mere 6% of respondents chose it as the fastest to recover, further reinforcing growing speculations that the current crisis may have permanently changed the retail landscape.
Conversely, while 32% of respondents named coworking as the most affected asset type other than hospitality, 25% also believe it to be the commercial asset type that will recover the fastest.
Office, multifamily and industrial are considered the next most-affected asset classes, while self-storage is confidently considered the safest in the current context. Indeed, only 4% of respondents said self-storage was the most affected commercial real estate sector, while 54% identified it as the least affected. Furthermore, the duress this sector might suffer is expected to ease quickly, with one in five commercial professionals expecting self-storage to recover at the fastest pace.
Home Offices & Private Outdoor Spaces to Lead Amenity Wishlist
While the commercial real estate sector is feeling the pressure under social distancing and lockdown measures, the public’s home confinement is even more defined. Namely, quarantine is reshaping people’s relationships and attitudes toward their homes.
Consequently, because of the near-overnight transition to widespread work-from-home policies, 62% of residential real estate professionals anticipate increased interest in homes with dedicated workspaces. The increased demand for home offices is also expected to push many to consider larger homes. Thus, one in five NYC real estate professionals expect buyers to show more interest in upsizing than they did prior to the pandemic.
Likewise, with public green spaces out of reach or unsafe for many, 55% of professionals predict that homes with private outdoor spaces — such as decks, balconies, yards or gardens — will generate increased interest. Similarly, 36% of respondents think exclusive-access building and community amenities will become more important. Notably, 18% of residential professionals don’t think that the extensive work-from-home policies will have any influence on consumer housing preferences.
After the pandemic subsides, the majority of respondents expect a mix of pricing and private space to generate the most interest from buyers. Specifically, 33% of professionals expect single-family homes to see the strongest buyer interest (across all price points), while only 10% believe condos will be most enticing. Additionally, 45% of respondents anticipate affordable/starter homes to be the most sought-after category.
Shelter in Place, Reach Out & Diversify
As NYC’s real estate professionals continue to weather the storm, many are using this time to enhance their online presence. They’re transitioning as many business activities as they can to the digital space, diversifying portfolios, and investing in distressed assets and debt.
Residential professionals, in particular, are maximizing online operations; working toward proficiency in the latest real estate technology, especially virtual tours; widening their online reach; and strengthening existing or previous relationships.
In the meantime, beyond attractively priced starter homes, residential professionals see opportunities in finding motivated sellers, implementing price adjustments and identifying buyers who want to relocate as a result of the crisis – for example city-dwellers looking for more space in lower-density outer boroughs.
At the core, most professionals are making sure they’re available and in constant communication with clients and partners, whether to provide information or real estate services.
The city’s commercial brokers, too, are reorienting to online operations in droves. However, they see the most opportunity and potential for recovery in different areas — including reduced commercial taxes and fees; taking advantage of low interest rates; renegotiating leases and terms for adversely affected clients; identifying distressed asset opportunities; and lobbying government bodies for legislative changes.
In order to identify key insights from real estate professionals, we conducted a flash survey with 97 residential and 99 commercial real estate professionals based in New York City. The survey was conducted from April 8 to 23, 2020, through SurveyMonkey.