February 8, 2022
Brokers said Omicron surge was a serious but temporary setback and that smart ongoing management of COVID issues is critical for long-term success
Report shows some cautious optimism about new Mayor as brokers continue to closely watch government’s handling of the economy, business regulations and public safety
NEW YORK, NY – The Real Estate Board of New York (REBNY), the City’s leading real estate trade association, today reported that broker confidence in the real estate market decreased in Q4 2021 due to impacts of the Omicron variant – but many brokers remained optimistic about the market’s six-month outlook.
According to REBNY’s Q4 2021 Real Estate Broker Confidence Index, the Current Confidence Index (CCI) for residential brokers dipped from 56.29 in Q3 to 50.63 in Q4. For commercial brokers, the CCI registered a sharper drop, falling from 36.11 to 17.89.
While declining case rates seem to indicate that the Omicron surge is largely behind us, its negative impact was apparent, particularly on the commercial side where nearly 50% of brokers responding to REBNY’s survey mentioned Omicron as their top concern about the market in Q4.
The reversal of Summer and Fall 2021 momentum in the office, retail, tourism and hospitality sectors weighed on commercial brokers. Office occupancy in the New York metro area fell from 28.3% to 21.6% between late-November and mid-January, according to Kastle Systems. The city’s retail foot traffic also slipped, particularly in office-dependent corridors. Seated dining volume in restaurants fell to nearly 68% below pre-pandemic levels in early January after previously hovering around 40% below pre-pandemic levels, according to OpenTable data.
REBNY’s Expectations Index (EXI), which tracks sentiment about the market’s six-month outlook, remained relatively strong and barely budged in either direction. The EXI for residential brokers ticked down slightly from 45.88 in Q3 to 42.85 in Q4. For commercial brokers, the EXI ticked up slightly from 37.26 to 38.88.
This combination of general decrease in CCI and generally unchanged EXI indicates that most brokers view the negative impact of Omicron as a temporary setback that has not significantly detracted from their generally positive views on market outlook. Even so, brokers did express a degree of uncertainty on multiple fronts as we move forward into 2022.
While many brokers are taking a “wait and see” approach, some expressed cautious optimism about the new administration of Mayor Eric Adams and its future impacts on the city’s morale, business climate, and long-term economic recovery.
Brokers continued to highlight several core issues critical to rekindling the market’s pre-Omicron momentum and preventing a reversal of overall market progress in 2021. These include:
Resolving quality of life issues including crime, sanitation management and transit safety
Effective management of COVID to ultimately advance a shift from pandemic to endemic
Sensible government policies that support and incentivize business growth
Some brokers, particularly on the residential side, expressed concerns about the potential market impacts of economic trends like inflation, interest rates or supply chain issues. However, these types of economic concerns represent an improvement compared to a year ago, when fears of elevated unemployment and tight household spending were still prevalent. Additionally, record residential sales and surging rental activity in 2021 set aside any concerns about population loss or spending power that had loomed in 2020 when the pandemic first struck.
“As we turn the page on this temporary setback, the optimism of the brokerage community is a reminder that New York City can continue building economic momentum through sensible policymaking and better delivery of government services,” said REBNY President James Whelan. “It will be critical to make significant progress on public safety and quality of life this year and it has been encouraging to see Governor Hochul and Mayor Adams bring greater focus to these core issues.”
“The challenges of the previous quarter have not prevented New York City from continuing its strong recovery,” said William D. Abramson, Director of Sales & Leasing at Buchbinder & Warren Realty Group LLC. “The retail market, which was already transforming due to e-commerce prior to the impacts of COVID, continues to improve. The residential market has fully recovered with regard to prices and vacancy rates, and there is a great deal of confidence about what this year will hold for the office market as well. However, there are still a wide array of factors that could impact the future of the markets, including quality of life issues across the city, the local political climate and rising interest rates.”
Download the complete Q4 2021 Quarterly Real Estate Broker Confidence Index here.
For more information about REBNY research reports, visit go.rebny.com/Reports.
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