Tracking the changes in rental, co-op, and condo sizes as the real estate market changes

This week, real estate appraiser, Curbed graph guru, blogger, and Housing Notes newsletter writer Jonathan Miller looks at how the economic climate affects apartment sizes in Manhattan.

Looking back over the last 25 years, it become apparent that apartment sizes—regardless of whether they’re being rented or sold—are always in flux. The average rental apartment is typically smaller than the average co-op or condo sale, but the difference in how much smaller has varied greatly in the past two decades.

The rental to co-op conversion boom of the 1980s brought a lot more modestly priced apartments (i.e. studios and one-bedrooms) into the mix, especially from generic post-war rental buildings. That likely exhausted the availability of potential buildings to convert today—and in any case, the buildings that would make financial sense to convert to condos today are making their owners too much money as it is.

Here are a few observations:

  • During the 1990-1991 recession, the low end of the sales market dropped off, skewing the average size higher as unemployment and high interest rates shut down demand. The flood of stalled conversions and foreclosures were largely centered in the entry-level market and it took a number of years to sort out.
  • The housing boom/bubble period of 2003 through 2008 saw average sales sizes edging higher, but those were kept in check due to falling affordability. Prices were rising so quickly during this period that a lot of the new apartments skewed smaller to keep affordability from hurting sales volume. A 1,200-square-foot two-bedroom might have become a 1,125-square-foot 2-bedroom at the same price per square foot, resulting in a lower overall sales price. Otherwise, there would have been a rapid growth in average sales size during this period.
  • The post-Lehman market—roughly from 2009 through today—saw a slightly larger sales size than during the housing bubble, even though the new development space has introduced radically larger units. But still, keep in mind that this era of large super luxury units, say above $5 million, only represents about eight percent of the market.
  • During the period shortly before and after Lehman, the average rental size spiked, not because larger units were in higher demand, but because entry-level rental activity briefly collapsed. By 2012, the average size of a rental returned to housing bubble levels—around 1,000 square feet—and has remained fairly stable through today.

From http://ny.curbed.com/2016/9/1/12657436/manhattan-apartment-sizes-rental-condo-co-op

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