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Three Cents Worth: Limited Discounts In Low Rent District

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[This week, real estate appraiser, Curbed graph guru, and podcaster extraordinaire Jonathan Miller dips a toe in the renters' market.]

"Low Rent" is a relative term in Manhattan. No one is arguing that rents in Manhattan are "low" by any stretch of the imagination.

However when adjusting the median rental price over the past 15 years for inflation, the current median rent is below levels seen back in 1995. The actual median rent in the first quarter of 1995 was $2,000, but the cost of living was also less. Actually, the inflation adjusted median rent doesn't fall below the current $3,000 level until 3Q 1994 when it was $2,877 ($1,700 actual).

It's also important to note that this trend is based on face rent rather than net effective rents (face rent less concessions) since I haven't figured out a reliable way to measure it.

For two brief periods during the '98-'00 dotcom boom, face rents actually fell below asking rents as demand outstripped supply. The spike in late '03/early '04 correlates with the spike in purchase demand.

So when the local economy began to claw its way out of it's hole in early 2009, its logical that landlords would be eager to get tough and make up for lost time by dropping concessions and reducing discounts. The discount drop was unusually pronounced relative to rents because concessions were so high in 2009.

It is unclear whether this position of strength can be sustained over the next several quarters, seasonality aside.

· Inflation-Adjusted Median Rent v. Listing Discount [Miller Samuel]
· Three Cents Worth archive [Curbed]