'Warehousing': Why New York City landlords don't list all their empty apartments

As the co-founder of the Manhattan and Brooklyn real estate analytics platform UrbanDigs, John Walkup spent the last year watching — and tracking — plummeting rental prices and skyrocketing vacancy rates.

"Usually in real estate, like a battleship, none of these trends turn on a dime. But here, lo and behold, things actually did turn on a dime," Walkup said. "I mean, literally stopped and then came back ... [But] renters didn't really come back instantly."

And that's left landlords with more and more apartments sitting empty, not making them any money.

"They're sort of not advertising their full inventory," Walkup said, "simply because they don't want to overwhelm the idea of what the supply currently is."

The real estate world refers to this shelving of empty apartments as "warehousing." UrbanDigs reports landlords have now warehoused 50% of Manhattan's unrented apartments — more than three times the number of warehoused apartments in pre-pandemic February of last year.

"Sort of hide their cards a bit," Walkup said, "hide their desperation."

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Landlords also warehouse their properties to gamble on renting them for more money with fewer concessions at some point in the near future — in this case, over this vaccinated summer.

"From an economics perspective, that doesn't really make sense," StreetEasy economist Nancy Wu said.

Wu reminded us that even as the lowest rents in decades and most generous concessions maybe ever lure renters back to the city, setting new monthly lease-signing records for the last five months in a row, if any sizable number of landlords return their units to the market over the summer, that glut of inventory is going to keep rents low or even drive them lower still.

"The problem of course is you're carrying that inventory with you," Walkup said.

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And you're losing money every month by keeping those units off the market, risking losing more still if you return your warehoused units to the market and rent them for less than you could've when you delisted them.

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"This is not a collective effort by any means of the imagination," Walkup said.

"Rents are still at record lows right now," Wu said, "but they're not falling as quickly as they were a few months ago."

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The advantage of a market as historically renter-friendly as this one: Cities like New York, where housing represented the largest slice of the cost-of-living pie, now find themselves more affordable to a younger, more social, risk-oriented renter who might not have moved here pre-pandemic because they couldn't afford to.

"The idea is that it brings in this energy, this youth, this creativity back into the city that had maybe been stagnating because rents had been so high," Walkup said.

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