Keenan Beasley can afford to buy a $2 million apartment, but like many other Manhattan millennials, he’s renting.
With their increasingly mobile jobs and lifestyles, successful New Yorkers in their 20s and 30s are shying away from making a commitment to one city, let alone one apartment. And despite Manhattan’s astronomical rents, it’s costlier still to buy here, with the average Manhattan apartment now going for $1.73 million, a record high, according to Halstead Property.
“Buying doesn’t make sense for me, and most people like me are saying the exact same thing,” said Mr. Beasley, 31, co-founder of a marketing startup, The Strategy Collective, and a calendar app called Cannonball. “I’m doing three cities a week, and I’m in New York at best 50 percent of the year.”
Itzy Garay, leasing manager for Town Residential, says she sees millennial clients paying up to $12,000 a month rather than buy. “This new millennial group has a much more entrepreneurial spirit,” Ms. Garay said. “They’re taking the money they would spend on buying an apartment and starting their own businesses instead.”
‘A lot of times [millennials are] skeptical about the market, especially with the appreciaton we’ve seen and with all the condo buildings coming on line.”—Town Residential's Michael Bezjak |
For the three years he has lived in Manhattan, Mr. Beasley has rented a 1,000-square-foot one-bedroom with an office in the Truffles Tribeca, just off the West Side Highway. Current rent: $4,700 a month. Hoping for a more central location, he has looked at condos in the Flatiron District and Soho, but hasn’t found anything comparable in his price range—nor does he relish the idea of parting with a big chunk of cash. “As an entrepreneur, you’re trying to hold on to as much cash as possible,” he noted.
Neeta Mulgaokar, a real estate broker with Mirador and a millennial herself, says renting is the norm for flush New Yorkers in her age range.
“A large percentage of my clients are millionaires who are willing to spend large amounts of money every month to avoid the commitment of having to buy,” said Ms. Mulgaokar, 33, who rents a studio near Madison Square Park. “The prices here are so high, and you’re never sure if you’re going to be relocated. I have no desire to buy, and I see renting as a way to preserve my freedom.”
Add to that the competition would-be condo owners face from all-cash international buyers and the strict rules co-ops place on leasing apartments, and rentals start to look even better. “Maybe they’ve gone through five or 10 bidding wars and said, ‘I don’t want to deal with this anymore,’ ” Ms. Garay said. “‘Let me get myself into a beautiful luxury rental and deal with this in a year.’ ”
The sentiment is echoed by Town associate broker Michael Bezjak. He is currently working with a 32-year-old client in the financial sector who originally looked to buy. “He’d rather keep an eye on the market and look out for other opportunities like startups and self-managing his portfolio,” Mr. Bezjak said. “I hear similar stories all the time … A lot of times, [millennials are] skeptical about the market, especially with the appreciation we’ve seen the past few years and with all the condo buildings coming on line.” At press time, his client was hoping for approval on his application for an $11,000-a-month one-bedroom in Soho.
Sometimes the rental turns out to be so ideal that the buying equation just doesn’t add up. “It’s the cost-of-ownership thing,” said Dionna McPhatter, 33, Mr. Beasley’s partner in The Strategy Collective. “I can get more space in a better location for my budget if I rent in New York.” In her case, that space is a 1,600-square-foot two-bedroom loft in Dumbo for $5,350 a month.
“If I wanted to buy, I’m priced out of the neighborhood I love,” Ms. McPhatter added.
Indeed, many studies show that millennials are more interested in access than ownership. Why buy items such as a house or a car, goes the philosophy of the 75 million Americans between 18 and 34 years old—who are expected to surpass baby boomers this year to become the largest generation—when you can easily rent them and avoid the hassles and expense of upkeep? Thirty percent of millennials in a recent Goldman Sachs study said they consider buying a home important, but it’s not a big priority.
Although home-buying among millennials has seen an uptick in some cities, especially those where it costs less to buy than to rent, according to the National Association of Realtors, that doesn’t appear to be the case in New York.
“I don’t know if it’s a preference so much as a budgetary constraint,” said Halstead real estate broker Ari Harkov. “For the few who are buying, they are mostly doing so with help from their families, or they work in a hedge fund where they have the unique ability to have earned enough and saved enough to be buying relatively young.”
Among older millennials who are married and have the benefit of two paychecks, “I’m definitely seeing a preference to buy,” Mr. Harkov said. “For the millennials in their 20s, many of them are not at a point in life where they feel the nesting thing kicking in.”
Chicago-native Rehan Kapadia, 22, a real estate broker for Bond New York and an NYU undergrad, would buy a nest in Manhattan if he could. He has bought two condos and a house in his hometown, but rents a 550-square-foot one-bedroom in Gramercy Park for $3,000 a month.
“You have to have so much capital and be willing to live in a smaller place,” said Mr. Kapadia of buying an apartment in Manhattan. “There aren’t a lot of apartments under $700,000 downtown. I couldn’t find them, and I’m a broker. So I took the money and invested in a different state where you can actually buy multiple properties, and I’m making money renting them out.”
Mike Salerno, 30, an attorney who rents a 530-square-foot one-bedroom in Soho, also has no plans to buy in Manhattan. “After seeing other housing markets, I just don’t feel that you are recouping the value of the money spent on an apartment in New York,” he said. “There is certainly no shortage of gorgeous properties, but even if you have a substantial amount of extra cash to purchase a beautiful home, your dollar stretches much farther outside Manhattan.”
In Manhattan, Mr. Kapadia would have been limited to studios in co-ops. “I didn’t want to go that route,” he said. “I travel a lot, I like to move. It’s very difficult to rent out a co-op.”
In contrast, if he needs to sublet his apartment for a few months, the management company would be “totally O.K. with that,” he said. Better still, management accepts American Express, so Mr. Kapadia collects frequent flyer miles with each rent payment—in the world of millennials, that’s valuable currency. ν
