It is May, and we hope you’re having a good day.

Residential Rents at Record Highs
Strong is an understatement; the rental market is overheated. Renters are facing some of the highest prices on record. In April, Manhattan’s median rent climbed to $4,500 a month – a stark six percent increase year over year, and the second record set in a short span of three months. Similar phenomena occurred in other boroughs. Queens’ median rent rose 9 percent to roughly $3,550, narrowing the gap with Brooklyn, where the median was about $3,600.

Several factors are pushing demand. Many would-be buyers remain renters, deterred by elevated mortgage rates and lingering economic uncertainty. With borrowing costs at unhandleable levels, the jump from renting to owning has become impossibly expensive for many New Yorkers. That imbalance has produced bidding wars in some neighborhoods, with tenants paying an average of 12% over the asking rent – the market is strikingly tight. It’s clear: supply dwarfs demand.

Rental supply remains scarce. The construction of new housing, especially affordable units, hasn’t been able to keep up with population and job growth. Vacancy rates for rental apartments are extremely low in desirable areas. Tourism surged, with NYC welcoming nearly 65 million tourists in 2024 and many young professionals returning to the city, the current situation simply cannot satisfy current demand.

The squeeze is reshaping how New Yorkers live. Many are doubling up with roommates or trading space for affordability in smaller apartments and cheaper neighborhoods. Others are moving farther out: New Jersey, upstate suburbs, or less expensive NYC submarkets, all in search of better deals. But overall, NYC rental pricing shows no sign of decreasing whatsoever, and renters should be ready for a competitive summer leasing season.

Housing Sales and Prices: Stable After Turbulence
Unlike the frenzied rental market, NYC’s for-sale housing market is more balanced, marked by stabilizing prices and gradually rising activity. After a volatile few years, home prices in NYC are climbing at a moderate pace in 2025. The median sales price citywide was about $764,000 in 2023, just 2% below the record high set in 2022. By early 2024, the median price ticked back up to roughly $785,000, essentially matching the pre-pandemic peak. It’s clear: NYC home values have recovered from the pandemic dip and are now inching upward, though not at the extremely accelerated rates seen nationally in 2020-2022. Over the past five years, NYC home price growth (roughly +16% since 2019) has been far more modest than the U.S. average (+40%+ nationally)— a testament to the city’s unique position and internal dynamics.

Real estate brokers report that buyers have acclimated to higher interest rates and are coming off the sidelines. The fourth quarter of 2024 saw a surprise uptick in closings and a 22% year-over-year jump in signed contracts for Manhattan homes; pent-up demand beginning to flow. This “spring revival” has carried into 2025. Lower pricing in 2023 (Manhattan’s median price per square foot fell ~5% in 2024 ) and a slight dip in mortgage rates from their peak helped entice buyers back. Many who paused their searches are now re-engaging, hoping to lock in a home purchase before interest rates potentially climb again or supply falls.

On that line, NYC’s housing supply remains near historic lows. Active listings in Manhattan at the end of 2024 were under 6,000, which was the lowest fourth-quarter figure in nine years. Citywide, new construction has not kept pace with household formation, and many existing owners are hesitant to sell (a phenomenon known as “rate lock-in,” where owners cling to their sub-3% mortgages). This limited inventory is propping up prices and turning NYC back into a seller’s market in many segments. Well-priced apartments, especially family-sized units, often receive multiple offers. Homes spend only about 42 days on the market on the median now, indicating brisk turnover. The co-op and condo market in Manhattan saw average selling prices rising again (~3% year-over-year in late 2024) after softness earlier in the year.

Overall, NYC’s residential real estate is characterized by high demand meeting tight supply. Buyers face less frenzy than during 2021’s boom, but they contend with higher financing costs. Sellers are achieving prices close to peak levels for quality properties, though they must be realistic in pricing given buyers’ budget constraints. As 2025 progresses, any relief in mortgage rates could further invigorate sales, but also push prices up if inventory doesn’t improve.

Commercial & Office Space: Turning a Corner?
No discussion of NYC real estate trends is complete without addressing the ever-so-impactful office market, which was arguably the most hurt by the pandemic. Manhattan’s office sector is showing signs of life in 2025. After years of high vacancy and uncertainty, leasing activity is on the rise, particularly for modern, high-end office buildings. In fact, the first quarter of 2025 saw Manhattan office leasing volume hit 12.2 million square feet, the strongest quarter since 2019. This post-pandemic high indicates that large tenants are again committing to NYC spaces. Big leases included a 400,000 sq. ft. expansion by Jane Street at 250 Vesey Street and ~330,000 sq. ft. deals by Universal Music Group and law firm Mayer Brown. Notably, many of the largest transactions were renewals with expansions, signaling that companies plan to stay in NYC long-term and even grow their footprints.

Driving this office rebound are several factors. Return-to-office rates have steadily improved, reaching about 75% of pre-COVID levels by early 2025 as more employers mandate in-person attendance at least part of the week. Industries like finance, law, and private equity, mainstays of NYC’s economy, are leading this return and snapping up premium office space. There is a clear flight to quality: the vacancy rate for top-tier “Trophy” office buildings has tightened to under 12% (and in prime Midtown hubs like Hudson Yards, under 10%). Older Class B/C buildings, by contrast, remain half-empty in some cases, as they struggle to attract tenants seeking modern amenities.

The office market’s bifurcation means that even as overall availability dips (now ~17.7%, down from 20% a year ago), less-competitive buildings are being repurposed or left behind. This has sparked discussions about converting obsolete office towers to residential use, an idea gaining traction with zoning changes and state incentives to encourage conversions for housing. Such initiatives, if realized, could gradually absorb surplus office space and help NYC’s housing crunch simultaneously.

Meanwhile, other commercial sectors are a mixed bag. Retail real estate in NYC is recovering (as noted with apparel sector trends), store vacancies in prime shopping corridors are falling, and retail rents are beginning to inch up after deep pandemic-era discounts. The hospitality sector is rebounding too: hotels are seeing high occupancy and room rates again, aided by that huge wave of 2024 tourism. Investors from overseas are once again eyeing NYC real estate, drawn by a weaker dollar and the city’s resilience. In fact, foreign buyers have been active in Manhattan’s luxury real estate in 2025, helping drive a resurgence in high-end condo sales and townhouse purchases.

Industrial and warehouse properties remain a hot commodity thanks to the e-commerce boom, vacancy for warehouses in the outer boroughs is minimal, and new logistics centers are commanding premium leases.

Outlook
As of May 2025, New York City’s real estate outlook is cautiously optimistic. The residential market shows strength: rents breaking records (good for landlords, tough for tenants) and a for-sale market that, while not cheap, is attracting buyers again. Much hinges on interest rates, any sustained drop could unleash a new wave of buyers and developers, whereas further rate hikes might cool things down.

On the commercial side, NYC’s shifting work culture (see our August Work Culture trend) will influence office demand. There are positive indicators that the worst is behind for offices, especially for high-end space as companies recommit to New York. Still, the city has an oversupply of aging office stock that needs creative reuse. How policymakers and developers handle that will shape the skyline’s future.

In summary, New York real estate in spring 2025 is defined by intense demand meeting limited supply in housing, and nascent recovery amid transformation in commercial property. The city’s real estate market has proved its resilience time and again, and the current trends suggest NYC is adapting once more to new economic realities, while remaining an immensely desirable place to live and invest.

Sources: NYC Comptroller – Housing Market Overview 2024 • Brick Underground – Manhattan Rents Hit New High • CRE Daily – Manhattan Office Market Roars into 2025