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Manhattan Vacancy Rate Drops, Rents Still Super High

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The October rental reports are out, and it's more of the same for Manhattan: high rents and low vacancy rates. The Elliman report, prepared by real estate guru Jonathan Miller, put the vacancy rate at an even 2 percent, while Citi Habitats put it even lower at 1.39 percent. This has kept rents high, with the average rent clocking in at $3,856, a 5.4 percent rise from October 2011. "Rents are remaining at elevated levels because mortgage lending remains as tight as it was when Lehman went under in 2008 but the economy is slowly improving," explains Miller. "Tenants who make the move to be a first time buyer are confronted with banks that don't really want to lend." Citi Habitats notes that rents have remained steady since September, but they have "have plateaued at an extremely high level."

The luxury and super-luxury market both showed gains, with median rents rising 5.1 percent and 14.9 percent. Miller notes that this happened for the same reasons as regular rent increases, "i.e. jumbo mortgage lending is even tougher than conventional."

Like Manhattan, Brooklyn saw tight credit keeping rents at elevated levels, with the price-per-square foot reaching $34.72?the highest it has been in four years, according to the Elliman report. But the average rent of $2,771 is actually six percent less than the same period last year. The high end market, the top 10 percent, of Brooklyn saw a 10.9 percent median price jump, which more than doubled the 5.2 percent gain in the overall market. One interesting thing about Brooklyn is that new rentals surged 23.2 percent. "That's not new volume, but means that a lot more people opted to try their luck elsewhere than renew their lease with the increase suggested by landlord," says Miller.

So what's this all mean? "Tight credit on purchase side and some gains in employment have kept rents high. Don't expect relief in sight for a while."
· October 2012 rental report [Elliman]
· Market reports [Citi Habitats]
· Market reports coverage [Curbed]