REBNY 4th Quarter 2021 Broker Confidence Report

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OMICRON DAMPENS BROKER CONFIDENCE, MARKET UNCERTAINTY ELEVATED

The residential Current Confidence Index (CCI) posted a minor dip from 56.29 to 50.63. The commercial CCI registered a sharper drop, falling from 36.11 to 17.89, its lowest mark since the first quarter of 2021. Both indexes fell for the second straight quarter.

Most brokers remained optimistic about the six- month outlook. The residential Expectations Index (EXI) barely budged, ticking down from 45.88 to 42.85. Commercial brokers maintained their positive outlook, pushing the commercial Expectations Index up from 37.26 to 38.88. The index is still below the record mark of 52.50 attained in midyear 2021.

WHAT’S BEHIND THE DECREASE?

The Omicron surge took some of the steam out of the momentum gained in the prior two quarters. Case counts surged in mid-December but were dropping off by the second week of January. Reduced mass transit ridership reflected the decision by many firms to have employees work remotely as well as reduced tourism and travel. Of note, bus and subway ridership also fell, but remained closer to its pre-surge levels, perhaps reflecting ridership among essential and front-line workers.

RESIDENTIAL BROKERS REMAIN MORE CONFIDENT THAN COMMERCIAL COUNTERPARTS

Stronger sentiment among residential brokers makes sense. The residential sector enjoyed record sales tallies in 2021. Sales more than doubled from 2020. REBNY reported $23.7 billion in sales during the first half of 2021, and analysis of the second half of the year shows even stronger volume. Multi- family leasing surged in the Summer and Fall. In December, Douglas Elliman reported that the median rent reached $3,392, a 21% spike from December of 2020. It also put median rent 0.1% above the pre-pandemic median average – the first time median rent has exceeded 2019 levels. Omicron had a more direct impact on the commercial sector, reversing the return to the office and keeping retail traffic subpar in office-dependent corridors. As recently as mid-December the office sector has been building momentum with reductions in sublet supply and improved leasing volume. Several major lease commitments such as Morgan Stanley’s 400,000-sf lease and 105 leases with a rent exceeding $100 PSF boosted confidence in strong demand for Class A space. Additionally, leasing in key retail corridors such as SoHo and Madison Avenue intensified as domestic and foreign retailers witnessed a rebound in foot traffic as well as the return of foreign tourists. Omicron curbed this momentum.