Manhattan magic: exploring New York City's new investment hotspots

Manhattan real estate has long held a certain allure – a vibrant cultural hub, a global financial centre, and a destination for luxury living. But with economic shifts and a constantly evolving market, is the Big Apple still a wise investment?

In Knight Frank’s latest New York Insight report, Oliver Banks, Head of US Residential Developments, says the city remains a compelling proposition for discerning investors.

"Manhattan is showing remarkable resilience," Banks tells us. "Even in 2023 with headwinds like inflation and rising mortgage rates, prime residential prices only dipped by 2%. This stability, coupled with a projected GDP growth of 1.47% in 2024, suggests Manhattan real estate remains a strong bet for investors seeking long-term appreciation."

Looking beyond the immediate horizon, Banks also emphasises Manhattan’s enduring appeal among domestic and international buyers. "Manhattan offers a unique lifestyle proposition – world-class museums, iconic restaurants, and a constant buzz of energy,” he explains. “This cultural richness, alongside a robust job market, is a magnet for high-net-worth individuals and young professionals, fuelling sustained demand for luxury property."

Safe haven for savvy investors

Manhattan's status as a safe haven for cash investors is a major draw. Last year, 68% of purchases in Manhattan were cash deals, allowing investor activity to continue despite the high-interest rate environment. "And with inflation persisting in the US, 'brick and mortar' becomes an even more attractive hedge," Banks says.

"Manhattan property offers a tangible asset with a proven track record of value retention," he adds. "And for those who want to rent out their property, Manhattan boasts a strong rental market, especially for luxury residences."

The recently completed Mandarin Oriental Residences, located on Fifth Avenue, exemplifies this trend. "The Mandarin Oriental caters to a global clientele seeking a pied-a-terre or a primary residence with the cachet of a world-renowned brand," says Banks. These fully furnished, turnkey homes offer the very highest standards, including everything from furniture and appliances “to Samsung televisions on the wall, cutlery and even Aqua de Palma soap in the bathroom,” Banks adds.

Strategic investment in the rental market

While rental growth in Manhattan is easing (Knight Frank data reveals a 0.3% fall in luxury Manhattan rents in 2023), it remains a landlord’s market. Strategic investments can still yield strong returns, says Banks. "Focus on properties with high occupancy rates. Studios and one-bedroom apartments are particularly in demand from young professionals, making them a good investment option."

Buildings like The Greenwich, a soaring 88-storey residential tower nearing completion, cater to this strategy. The development offers a mix of studio to three bedroom residences, plus a range of top tier amenities including a state of the art fitness centre, spa, cinema, co-working spaces and a crèche, appealing to a broad range of renters.

The recent ban on short-term rentals is expected to increase long-term rental inventory, something Banks says is a positive development for investors in the long run. “It should lead to a more stable pool of renters, which will make rental income projections and property management significantly easier.”

A buyer's market on the horizon?

With mortgage rates having peaked at set to ease in early 2025, a new wave of buyers may enter the market. "There's definitely a higher footfall now," observes Banks. "Many have been waiting for the right opportunity, and with mortgage rates expected to ease, coupled with an unloading of capital post-election, market conditions will be ripe for investors to act."

The strength of the dollar, coupled with the IMF's projection of robust US economic growth as reported by the Financial Times, makes Manhattan real estate an attractive hedge against currency fluctuations for some international investors.

However, Banks cautions against a one-size-fits-all approach. “Don't jump in just because mortgage rates are easing,” he warns. “Investors should be strategic when considering property types and locations to ensure they align with current market trends and their long-term goals."

The Waldorf Astoria, a new branded residence in the towers of the iconic hotel slated for completion in 2025, offers a glimpse into this strategic approach. “Its Midtown location and extensive 50,000 square feet of amenity spaces dedicated solely to residents cater to a specific demographic – high-net-worth individuals seeking a luxurious, hotel-style living experience," explains Banks.

Investing beyond midtown

While Midtown Manhattan offers a classic New York experience, Banks also highlights exciting opportunities beyond the city centre, such as The Greenwich. This development offers not only stunning views and top-tier amenities but also a strong sense of community.

"Greenwich is perfectly situated between the Financial District and trendy neighbourhoods like Tribeca and Soho," Banks explains. "The Financial District is undergoing a transformation, attracting a wider range of companies beyond traditional Wall Street firms. This influx, coupled with The Greenwich's proximity to excellent schools and universities, is creating a dynamic environment ideal for families, young professionals, and students alike."

"Perhaps the most compelling aspect of The Greenwich," Ollie concludes, "is the value proposition.  It offers everything you could want in a luxury residence – stunning views, top tier amenities and a vibrant location – at prices significantly more affordable compared to similar offerings in Midtown."

With careful planning and a strategic approach, investors can benefit from new opportunities in New York City. Knight Frank's New York City team can guide you through the process, helping you identify the right property that aligns with your investment goals. Get in touch with the team here.